Is homeowners insurance legally required?


No, you can legally own a home without homeowners insurance. However, if you’re taking out a mortgage on a house, your lender will likely require proof of homeowners insurance coverage.

Pat Howard 1600


Pat Howard

Pat Howard

Senior Editor & Licensed Home Insurance Expert

Pat Howard is a senior editor and licensed home insurance agent at Policygenius, where he specializes in homeowners insurance. His work and expertise has been featured in MarketWatch, Real Simple, Fox Business, VentureBeat, This Old House, Investopedia, Fatherly, Lifehacker, Better Homes & Garden, Property Casualty 360, and elsewhere.

Updated April 7, 2021 | 3 min read

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Homeowners insurance is not legally required, but if you plan on taking out a mortgage on a home, your lender will most likely require you to purchase coverage when you go to close on the property. 

If you happen to be one of the lucky few out there who has paid off their mortgage, you don't have to purchase homeowners insurance. But your home is arguably the largest financial asset you’ll ever own, so you’ll want to keep the property insured regardless. Additionally, homeowners insurance protects your personal belongings against disaster, as well as your personal liability in the event you’re held liable for injury or property damage. 

Key Takeaways

  • Homeowners insurance is not required by law, but most mortgage lenders will require you to purchase coverage before extending you a home loan

  • You can technically go without homeowners insurance if your home is completely paid off, but you’ll be without protection for your home and other assets in the event of a disaster or lawsuit

  • If your home is damaged or burglarized and you don’t have homeowners insurance, you’ll be left recouping the loss out of pocket and potentially jeopardizing your financial future

Is homeowners insurance required by law?

No, homeowners insurance is not legally required in any state, but mortgage lenders are allowed to require borrowers to purchase coverage. Most lenders actually require borrowers to provide proof of homeowners insurance before closing on the mortgage.

In the event you stop paying your policy premiums, your lending institution is legally permitted to purchase homeowners insurance for you and retroactively charge you for it. 

Why is homeowners insurance required for mortgages?

When a lending institution loans you money for a home, they take on a financial stake in the property. Homeowners insurance secures their investment in the unfortunate event that the home is badly damaged or destroyed by a hurricane, wildfire, or another disaster. 

What happens if you don’t have homeowners insurance?

Homeowners insurance covers your home and personal belongings if they’re damaged by a covered peril, like a fire or storm. If you’re liable for injury or property damage and a lawsuit is brought against you, your policy can help cover the settlement. 

But if you don’t have homeowners insurance, you risk having to cover everything out of pocket when something bad happens. If the prospect of paying for a new roof or replacing your HVAC system seems daunting, imagine having to finance an entire burnt down section of home due to the fact that you didn’t have coverage. 

That being said, you could be without homeowners insurance for any number of reasons: Maybe you accidentally missed a few months of insurance payments and your policy was canceled, or perhaps you filed several claims in a short period of time and your insurer decided to not renew your policy. What happens if you find yourself in policy limbo?

You’ll have time to buy a new home insurance policy

Your insurance company is required to give both you and your lender 30-days notice before your homeowners insurance is officially canceled, so worry not, you still have time to potentially get your policy reinstated or purchase coverage through a different insurer.

If you’re having trouble finding coverage after being dropped, check the status of your homeowners insurance CLUE (Comprehensive Loss Underwriting Exchange) report, an insurance claims database generated by the company Lexis Nexis. Your CLUE report details your claims history and is used by insurance companies to determine insurable risk. Insurers may reject or deny your application based on the information in this report. 

If you suspect your prior claims history is making it difficult for you to secure a new policy, you can access your report through Lexis Nexis and add clarifying notes to each claim incident. Providing context behind each claim may increase the likelihood of you being approved for coverage.

Your lender may buy homeowners insurance for you

If your homeowners insurance policy lapses, your lender is allowed to purchase force-placed insurance and charge you for it. Keep in mind that force-placed insurance isn’t the same homeowners insurance you purchase on the voluntary market. Most policies cover the physical structure of the home, but personal property coverage and liability coverage are not included. Furthermore, lender-placed insurance is around one and a half to two times more expensive than traditional coverage, according to Assurant.

Consider a FAIR plan

If you have a frequent claims history, prospective insurers will take note of that and you may have a difficult time finding homeowners insurance. That’s where Fair Access to Insurance Requirements (FAIR) plans come in.

A FAIR plan is a state-sanctioned insurance program that offers policies to high-risk applicants who have been repeatedly turned down on the private market. The downside is that these policies are generally more expensive and offer fewer coverage options than traditional home insurance.