There is no law that requires home insurance. However, mortgage lenders require that you obtain home insurance coverage before they agree to finance your home. However, mortgage lenders require that you obtain home insurance coverage before you agree to finance the purchase of your home. Home insurance protects the mortgage lender's investment by providing the money to repair or rebuild the home if it is damaged or destroyed by a fire, electrical storm, tornado, or other covered event.
In most cases, lenders require buying home insurance before the loan closes and to maintain coverage for the life of the loan. By getting the coverage you need even before you move to your new home, you and the lender protect your purchase from a disaster. It's important to research several insurance policy options, as they may offer different levels of coverage. And different households may have different coverage needs.
For example, if your home is located in or near a floodplain, you may need to add flood insurance coverage to your policy. Even if the lender doesn't require you to buy home insurance with flood coverage, you might consider it. Some homes are located where earthquake insurance would be a good investment, while others don't need it. So, be sure to evaluate the best insurance coverage for your specific needs.
You must show proof of home insurance to your lender before they give up the keys to your property and finance your home loan. Until your home is paid in full, your lender maintains a lien on your property, so it's in their best interest to make sure the property is insured while you pay your mortgage. Homeowners insurance seems omnipresent, but is it a legal requirement that you have it? It depends. If you own your home and don't have a mortgage, no, legally you don't need to have home insurance.
But if you have a mortgage, your lender will likely require you to have home insurance as part of the loan agreement. This is due to the risks associated with lending such large amounts of money. State or federal law doesn't require homeowners insurance. This is different from car insurance, where most states have minimum requirements on the amount of coverage you need before you can hit the road.
However, it's worth noting that you may be asked to have homeowners insurance if you have a mortgage, so your lender can protect your interests in your home.
