What Is Homeowners Insurance?
Homeowners Insurance: Insurance that covers damage to the home and liability, required by every mortgage lender.
Also called: hazard insurance, HO-3
Homeowners insurance pays to repair or rebuild your home after covered damage, such as fire, wind or theft, and covers personal liability. Lenders require it because the home secures the loan.
What lenders require
- Dwelling coverage at least equal to the replacement cost or the loan amount
- The lender named on the policy through the mortgagee clause
- Coverage in force on or before closing day
- Separate flood insurance in high-risk flood zones
Policy types
- HO-3: the standard policy for single-family homes
- HO-6: for condo owners, covering interiors and personal property
- Dwelling fire (DP-3): for rental properties
How it's paid
The first year is usually paid at closing. Afterward, the servicer collects a monthly share through your escrow account and pays renewals.
Good to know
Standard policies don't cover floods or earthquakes. Check wind and hail deductibles, which are often a percentage of the dwelling coverage.