Published: June 2025
If you’re purchasing a home in the U.S., you are no stranger to the fact that homeowners insurance is a “must-have.” However, is it actually required by law or is it one of the things that mortgage lenders usually ask for?
In this article, we will analyze what it is the truth behind the homeowners insurance requirements, what is legally enforced, and why your mortgage lender can force you to purchase it even if the government is not demanding it.
⚖️ Is Homeowners Insurance Required by Law?
No, homeowners insurance is not required by federal or state law. This means that you are not obliged to get insurance if:
- You acquire a property with no loan entirely in cash.
- Owning a home with no debt is a must.
Indeed, neglecting insurance involves enormous risks. You are the one who will have to bear the out-of-pocket expense for any events such as fire, theft, natural disasters, or lawsuits filed against you.
🏦 Why Mortgage Lenders Require It
Although it is not a legal standard, most mortgage lenders will not allow you to take out a mortgage if you forget about homeowners insurance.
Why?
Because the bank or lender is the owner of your home with the fact of the loan until it gets fully paid. The insurance is a guarantee that protects their investment if the house is ruined or destroyed.
✅ Lender rule, not a legal rule — But the effect is the same: No insurance = No loan.
Coverage Minimums
Most lenders impose:
- Dwelling coverage equal to the loan amount at
- Named perils coverage (fire, wind, vandalism, etc.)
- Perhaps, you can decide to cancel your flood insurance when you are no longer in a FEMA flood zone.
What Happens If You Cancel It?
When you cancel your homeowners insurance midway through the mortgage term, your lender can do the following:
- Buy a policy for you (called force-placed insurance)
- Add it to your monthly payments
- Charge you more, since these lender policies are often costlier
- Potentially default your loan
Such an event can ultimately negatively influence your credit score, or in very rare cases, it can lead to foreclosure.
Special Case: No Mortgage = No Requirement
If your home has been fully paid off, you don’t have to fulfill anyone’s request for homeowners insurance. However, most homeowners still decide to hold onto it mainly for the protection it offers against:
- Fires
- Natural disasters
- Lawsuits
- Theft
- Vandalism
Something as small as a basic policy can help you guard your home equity and personal savings from threats.
Renting an Apartment & Condo Ownership: Different Rules
- Renters: The landlord shall have insurance covering the structure of the building, but renters’ insurance is not a necessity (although it is much recommended).
- Condo Owners: You will have to get an HO-6 policy for the coverage of the interiors, and the personal property (most of the time, the condo board or the mortgage lender insists on it).
Buy a policy for you (called force-placed insurance)
Is this your final
| Requirement Type | Is Insurance Mandatory? |
|---|---|
| Federal Law | ❌ No |
| State Law | ❌ No |
| Mortgage Lender | ✅ Yes (Almost Always) |
| Cash Buyer | ❌ Not Required |