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Executive Order for Policyholder Payments
If you’re buying a home or refinancing one, it’s natural to ask: Is homeowners insurance required for a mortgage? For most homebuyers, the answer is yes. While homeowners insurance isn’t required by federal law, nearly all mortgage lenders make it a condition of approving and maintaining a home loan.
At Club Agency, we help homeowners across the Northeast understand insurance requirements and find coverage that protects both their home and their finances. Here’s what you need to know.
When you take out a mortgage, the lender has a financial stake in your property until the loan is paid off. The home itself serves as collateral for the loan. If the property is damaged or destroyed by a covered event—such as a fire, storm, or vandalism, the lender wants assurance that repairs can be made.
Homeowners insurance protects the lender’s investment and the homeowner’s financial future. Without insurance, a major loss could leave the borrower unable to repay the loan while also facing significant repair costs.
Homeowners insurance is not legally required under federal law. However, lenders—including banks, credit unions, and mortgage companies—almost always require it as part of the loan agreement. This applies to:
As long as you have an active mortgage, you’ll typically be required to maintain continuous homeowners insurance coverage.
Mortgage lenders usually require a standard homeowners insurance policy that includes specific types of coverage.
This covers the physical structure of your home, including walls, roof, and foundation. Lenders generally require enough dwelling coverage to rebuild the home, not its market value.
Coverage for detached structures such as garages, sheds, or fences is commonly included in standard policies.
While lenders may not require personal property coverage, most policies include it. This protects your belongings inside the home, such as furniture and electronics.
Liability insurance protects you financially if someone is injured on your property. Though not always lender-mandated, it’s an important part of a complete policy.
If your home becomes uninhabitable due to a covered loss, this coverage helps pay for temporary living expenses like hotel stays or rental housing.
The amount of homeowners insurance required depends on several factors, including:
Lenders usually require coverage equal to the replacement cost of the home—not the purchase price or market value. Working with an experienced insurance broker helps ensure you meet lender requirements without overpaying.
If your homeowners insurance lapses or is canceled, your lender may take action to protect their investment by purchasing force-placed insurance (also called lender-placed insurance).
Force-placed insurance:
Maintaining your own policy gives you better coverage, lower costs, and peace of mind.
If you own your home outright and have no mortgage, homeowners insurance is not required. However, going without coverage can be risky. Even one unexpected event—such as a fire or severe storm, can result in costly repairs or total loss.
For most homeowners, insurance remains a smart financial decision, even when it’s not required.
As an independent insurance brokerage, Club Agency compares policies from multiple top-rated carriers to help homeowners across the Northeast find coverage that meets lender requirements and fits their budget. We focus on:
Whether you’re buying your first home or reviewing an existing policy, our team is here to help.
Homeowners insurance is a key part of securing and maintaining a mortgage, and choosing the right policy matters. Call Club Agency at (866) 784-9785 to speak with a knowledgeable advisor. Contact us today to compare homeowners insurance options and make sure your mortgage requirements are fully covered.
