Why your lender requires homeowners insurance, and what the CFPB says if it is hard to get

A lender wants the home that backs your loan to stay insured. This page sets out what the CFPB says about the requirement, flood coverage, and what can happen if coverage lapses or is hard to find.

The short version: The CFPB says lenders generally require proof that you have homeowner’s insurance, because they want to make sure the property is protected.^[1] If you do not have insurance, your lender is allowed to buy it for you and charge you, but it must give you advance notice.^[1] A home in a designated Special Flood Hazard Area generally requires flood insurance, which is extra.^[2]

What this term means: Homeowner’s insurance pays for losses and damage to your property if something unexpected happens, like a fire or burglary.^[1] It is sometimes called “hazard insurance,” and it is not the same as mortgage insurance.^[1] An escrow account is an account your servicer keeps to pay certain bills for you.

What the CFPB says about the requirement

Standard homeowner’s insurance does not cover damage from earthquakes or floods, but it may be possible to add this coverage.^[1]
Many homeowners pay for insurance through an escrow account: you pay your lender, the lender holds the insurance part of the payment, and pays the bill when it is due.^[1]
The cost of homeowner’s insurance and similar insurance appears on page one of the Loan Estimate, in the “Projected Payments” section.^[1]
The CFPB says you can shop separately for homeowner’s insurance and choose the provider and plan.^[1]

Our guides to escrow analysis and why a payment changes explain what happens when the insurance amount in escrow changes.

If the insurance lapses: lender-bought insurance

The CFPB says that if your lender buys insurance because you did not keep up your own, that insurance may only cover the lender and not you, and it may be more expensive than what you could buy on your own.^[1] Regulation X sets the notices a servicer must send first; see our guides to force-placed insurance notices and force-placed flood insurance.

Flood insurance

The CFPB says flood insurance costs extra because it is typically not covered by standard homeowner’s insurance.^[2]
It quotes FEMA as saying Special Flood Hazard Areas have at least a one in four chance of flooding over a 30-year mortgage, and says flooding occurs outside these areas too.^[2]
It says sellers must inform the new owner of the requirement to have flood insurance.^[2]
It says a new owner must pay the full risk-based cost according to FEMA’s standards, even if the current owner pays less because of limits on annual rate increases.^[2]

When coverage is hard to find

The CFPB says people who own high-risk properties often struggle to buy affordable coverage from insurance companies.^[2]
It says owners might turn to state-operated Fair Access to Insurance Requirements (FAIR) policies or force-placed plans as a last resort.^[2]
It says that if a home is insured through a FAIR plan or a force-placed plan, you could have trouble finding private, low-cost homeowner’s insurance.^[2]
It suggests asking the seller whether their homeowner’s insurance has been nonrenewed in the past five years, and says nonrenewals are not always a sign of increased risk but can indicate that insurance may be harder to find or more expensive.^[2]
It says past insurance claims are also likely to raise the cost of insuring the property.^[2]

The CFPB page lists these as questions to ask before you make an offer. It does not say that any one option is suitable for any person, and neither do we.

How to verify this yourself

Your Loan Estimate shows the insurance amount your lender included; see how to read it. Ask the lender or servicer, in writing, what insurance the loan documents require and what proof it accepts. Then read the two CFPB pages in the reference list. Our suggestion: for coverage questions, ask the insurance company or an agent licensed in your state. Our published standard and the Register cover how we check loan originators; they do not review insurance.

What this page does not cover

This page is general information, not insurance, legal or financial advice. It does not say what coverage your loan requires, or what any policy covers or costs. It does not cover reverse mortgages, home equity lines of credit or manufactured-housing loans not secured by real estate, which the CFPB says receive different disclosures. The CFPB pages were last reviewed 8 August 2024 and 22 May 2024. This page was last reviewed 3 October 2026.

Your next step

Ask your lender for the insurance requirements in writing, and keep proof of current coverage where you can find it. Then return to the Mortgage help library.