HOME BUYING
From Listings to Living
The last mortgage payment cleared in March. In April the servicer refunded what was left in the escrow account, and in June the homeowners insurance renewal arrived at the house instead of at the bank, with a premium due in 30 days. For the first time in 22 years, the owner had to decide for herself whether to pay it.
So, do you have to have homeowners insurance? Usually not because of a statute. The Texas Department of Insurance says it plainly in its homeowners insurance guide: the law does not require you to have home insurance, but if you still owe money on your home, your lender will. Maryland's regulator says the same about condo policies. Your own state's insurance department is the place to confirm the rule where you live.
The obligation usually comes from a contract, not a statute. Three sources can make insurance mandatory for you: a mortgage or home equity loan, a condominium or HOA declaration, and, for a home with a federally backed or regulated loan in a mapped high-risk flood zone, federal flood insurance rules. Once none of those applies, insurance is your call, and for most owners still a sensible one.
Leevli Editorial Team
The Texas guide, which applies whether you own in Houston or anywhere else in the state, adds that even though it is not legally required, home insurance is a good idea because it protects your home and other assets.
Maryland applies the same logic to condos. The Maryland Insurance Administration says a condominium unit owner is not required under Maryland law to carry an HO-6 policy, but that in many cases the mortgage lender or the association's governing documents require one. That is the pattern a buyer in Silver Spring should expect.
Lenders often call the same coverage hazard insurance. Our explainer on what hazard insurance is covers that vocabulary, and our guide to what hazard insurance covers walks through the perils and exclusions.
Your mortgage or deed of trust typically requires you to keep the property insured, because the house is the lender's collateral. The detailed rules come from whoever buys or insures the loan.
| Loan | What the lender requires | Source |
|---|---|---|
| Conventional loan sold to Fannie Mae, house or townhouse | A policy on a Special form or equivalent covering fire or lightning, explosion, windstorm including named storms, hail, smoke, aircraft, vehicles, and riot or civil commotion; replacement cost basis, except that roofs need not be; maximum deductible 5 percent of the coverage amount, including each separate wind or wildfire deductible | Fannie Mae Selling Guide B7-3-02 (version dated August 5, 2026) |
| Conventional loan, condo unit | A unit owners policy when the master policy leaves any part of the unit interior or improvements uncovered, or carries a per-unit deductible | Fannie Mae Selling Guide B7-3-04 |
| FHA loan | Evidence of hazard insurance in the case file; flood insurance for the life of the loan if the home is in a Special Flood Hazard Area | HUD Handbook 4000.1 |
Fannie Mae's rules are in Selling Guide B7-3-02. On a policy with $400,000 of dwelling coverage, an illustrative figure, a 5 percent ceiling means no required peril can carry a deductible above $20,000. If the only affordable quote in a coastal market has a higher wind deductible, a loan sold to Fannie Mae cannot close on that policy.
FHA borrowers face the same basic requirement under HUD Handbook 4000.1, plus FHA's own property standards; our guide to what an FHA loan is covers the rest of the program. Because the premium is part of your monthly housing payment, it also shrinks the loan you qualify for, which is part of the math in our guide to how much house you can afford.
The requirement also explains how claims are paid. In Texas, TDI notes, if you owe money on the home, the insurer makes the repair check out to both you and your mortgage company, which in most cases releases the money as the work is done.
Many lenders collect one-twelfth of the annual premium with each mortgage payment, hold it in an escrow account and pay the insurer at renewal. Under Regulation X, 12 CFR 1024.17(k), the servicer must pay escrowed insurance on time as long as your payment is not more than 30 days overdue, advancing its own funds if the account runs short. When the premium rises, the escrow payment follows, which is one of the usual reasons behind the question in our guide why did my escrow go up.
Do not confuse homeowners insurance with mortgage insurance. Private mortgage insurance protects the lender if you stop paying the loan; homeowners insurance pays to repair the house. Both can sit in the same monthly payment, and our explainer on PMI meaning covers the first. At a purchase, the prepaid items on your closing statement can include homeowners and flood insurance premiums, as HUD's handbook notes, and who covers which prepaid items is part of our guide to who pays closing costs, the buyer or the seller.
If the policy lapses while you have a mortgage, the servicer can buy coverage and charge you for it. Regulation X calls this force-placed insurance (often searched as forced place insurance), defined as hazard insurance obtained by a servicer on behalf of the loan's owner that insures the property securing the loan. The rule in 12 CFR 1024.37 sets the steps before you can be charged:
On a sample timeline, with a first notice mailed June 1, the reminder could go out July 1 and the earliest charge would fall on July 16. If you have an escrow account, a separate rule in 12 CFR 1024.17(k)(5) generally bars a servicer from force-placing coverage on a borrower more than 30 days delinquent when it can keep the existing policy alive by paying the premium from escrow, even if that means advancing funds.
Flood coverage is handled separately. Regulation X excludes flood insurance required by the Flood Disaster Protection Act from its force-placed definition, and the banking agencies' flood rules give the borrower 45 days after notice to buy a policy before the lender or servicer must buy one and charge for it.
The fix for a lapse is fast paperwork: send the declarations page for a new policy, confirm the servicer received it, and check the next statement for any force-placed charge. A lapse can also be a default under the mortgage, so call the servicer the day you learn about it.
Standard homeowners policies generally exclude flood, and the federal flood requirement works independently of whatever your homeowners policy says. Under the FDIC's version of the rule, 12 CFR 339.3, a supervised bank may not make, increase, extend or renew a loan secured by a building in a Special Flood Hazard Area unless the building is covered by flood insurance for the term of the loan. The minimum is the lesser of the outstanding principal balance or the maximum coverage available for that type of property. The other federal banking regulators have parallel rules, and for most residential loans made on or after January 1, 2016, the regulated lender must also escrow the flood premium, with exceptions such as a second lien behind a first mortgage that already carries the required coverage.
The National Flood Insurance Program caps a homeowner's building coverage at $250,000 and contents at $100,000, according to FloodSmart. So on an illustrative $380,000 loan, the minimum building coverage would be $250,000, the NFIP maximum. FloodSmart also says new policies usually take effect 30 days after purchase, with an exception when you buy in connection with making, increasing, extending or renewing a mortgage, which is why the lender's flood determination should come early in the transaction.
FHA is stricter about eligibility. HUD's handbook says a property in an SFHA is eligible only if the community participates in the NFIP, and the flood coverage must be at least the lowest of 100 percent of the replacement cost of the insurable value of the improvements, the NFIP maximum for that property type, or the outstanding principal balance.
Not because of the lender. Once the loan is paid and the lien released, the lender's insurance clause no longer binds you. Under Regulation X, 12 CFR 1024.34(b), the servicer generally has 20 days, excluding weekends and legal public holidays, to return any escrow balance after payoff, and from then on the renewal bill comes to you.
Three things can still require coverage: an HOA or condo declaration, a home equity line that is still open, and, for a condo, the association's rules on unit owner policies. Otherwise the choice is yours, and dropping coverage means carrying the full rebuild cost and any liability claim personally. The easy way to lose coverage by accident is to let the first renewal after escrow ends go unpaid.
In a condo, two policies split the building. The association's master policy covers the structure and common areas to the extent the declaration and state law require, and the unit owner's HO-6 covers the rest. Maryland's regulator describes the HO-6 as covering the unit interior and improvements, personal belongings and liability inside the unit, with optional loss assessment coverage for the owner's share of a loss above the master policy limits. In Maryland, the owner of the unit where damage originates is responsible for the master policy deductible up to $10,000. Fannie Mae's Selling Guide B7-3-04 requires the unit policy whenever the master policy leaves part of the interior uncovered or carries a per-unit deductible.
The split differs by state and by building, which is why the documents matter more than the floor plan. Our guides to the condo association master insurance policy, to who pays for what, loss by loss, and to how much condo insurance you need take you through the reading. FHA buyers also need the building itself to qualify, as our guide to FHA qualified condos explains.
Florida adds its own layer. Buying an older unit in Brickell or an older house in Fort Lauderdale may mean the insurer asks for a 4-point inspection before writing the policy, the subject of our guide to what a 4-point inspection is. Start the insurance quote the week your offer is accepted, not the week before closing. Residents can tell you which carriers actually write policies in a specific building; that is a good question for Ask a Resident.
This guide explains general rules; it is not legal or insurance advice. For a specific policy, the next step is a licensed insurance agent, your lender's insurance department and, for a disputed force-placed charge, a written notice of error to your servicer or a consumer attorney.
Insurance rules are written in documents, but residents know which carriers will actually write a policy in the building and what a claim really cost them.
Listings show the property, but they rarely explain the lived reality around it. On Leevli, a mover can explore the city, review neighborhood and building information, and ask a verified resident the specific questions that remain unanswered. That human layer helps readers know what to investigate before signing a lease, making an offer, or choosing between two addresses.
Not by state law in Texas, whose insurance department says the law does not require home insurance but your lender will if you owe money on the home, and Maryland says the same of condo HO-6 policies. Check your own state's insurance department. In practice coverage becomes mandatory through a mortgage, a home equity loan, a condo or HOA declaration, or federal flood rules for some loans.
No lender is involved, so no lender can require it, and in Texas, for example, state law does not either. An HOA or condo declaration still can. Paying cash and skipping insurance means you carry the full cost of rebuilding after a fire or storm and any liability claim from an injury on the property yourself.
You likely breach the mortgage, and the servicer can buy force-placed coverage and bill you. Federal rules require a first written notice at least 45 days before the charge and a reminder at least 15 days before it. Force-placed coverage may cost significantly more and cover less. Send proof of a new policy quickly; the servicer must cancel and refund overlap within 15 days of receiving it.
At least 45 days from the first written notice before it can charge you, with a reminder no earlier than day 30 and at least 15 days before the charge. If the first notice went out June 1, the earliest charge would fall on July 16. Flood insurance follows separate banking rules that give the borrower 45 days after notice to buy a policy.
For loans sold to Fannie Mae, the policy should be on a Special form or equivalent, cover listed perils including windstorm and hail, settle on a replacement cost basis except for roofs, and carry a deductible no higher than 5 percent of the coverage amount. Lenders can add their own requirements, so ask for them in writing early in the application.
Yes, if the building is in a FEMA Special Flood Hazard Area and the loan is made by a federally regulated lender or backed by FHA. Coverage must equal at least the lesser of the loan balance or the maximum available, which is $250,000 for a home's building under the NFIP. Outside those zones federal law does not require it, though standard homeowners policies generally exclude flood.
There is no fixed price. Federal rules require the servicer's notice to warn that force-placed coverage may cost significantly more than a policy you buy and may not cover as much, and the charges must be bona fide and reasonable. The cheapest outcome is avoiding a lapse, or proving continuous coverage so the servicer refunds the overlap.
Not for the lender. The servicer generally returns the escrow balance within 20 business days of payoff, and the renewal bill then comes to you. An HOA or condo declaration may still require coverage. A common mistake is assuming the policy renews automatically after escrow ends; check the renewal date and set up payment yourself.
It depends on the declaration. Maryland's insurance regulator notes that in many cases a condo unit owner must carry an HO-6 policy because the lender or the association's governing documents require it, even though state law does not. Single-family HOA documents may also contain an insurance clause. Read the insurance article of the declaration before closing, and ask whether the association wants proof each year.
Yes. HUD's handbook lists evidence of hazard insurance among the documents for an FHA case, and a home in a Special Flood Hazard Area must also carry flood insurance for the life of the loan and sit in a community that participates in the NFIP. If coverage lapses, the servicer may advance the premium or force-place coverage under federal rules.
This article is informational and does not constitute legal, financial, tax or insurance advice.
