Homeowners Insurance

Hazard Insurance

Date of Last Revision: August 8, 2026

What is homeowner's insurance? Why is homeowner's insurance required?

Homeowner’s insurance pays for losses and damage to your property if something unexpected happens, like a fire or burglary. When you have a mortgage, your lender wants to make sure your property is protected by insurance. That’s why lenders generally require proof that you have homeowner’s insurance.

Standard homeowner’s insurance doesn’t cover damage from earthquakes or floods, but it may be possible to add this coverage. Homeowner's insurance is also sometimes referred to as "hazard insurance".

Many homeowners pay for their homeowner’s insurance through an escrow account as part of their monthly mortgage payment. You make the payments to the lender, and the lender holds the part of the payment that is for insurance in an escrow account. Then, when the bill for the insurance is due, the lender pays it from the escrow account.

The cost of your homeowner’s insurance, as well as any similar insurance to protect the property, is listed on page one of your Loan Estimate, in the “Projected Payments” section. However, it’s usually a good idea to do your own research about how much homeowner’s insurance costs. You can shop separately for homeowner’s insurance and choose the provider and plan that is right for you.

If you don’t have insurance, your lender is allowed to buy it for you and charge you for it—but your lender must give you advance notice. If your lender buys insurance on your home because you did not keep up your homeowner’s insurance, that insurance may only cover the lender, and not you. It also may be more expensive than what you could buy on your own.

Homeowner’s insurance protects your property. Homeowner’s insurance is not the same as private mortgage insurance (PMI).

Note: You will not receive a Loan Estimate or Closing Disclosure if you are shopping for:

For these kinds of loans, you should receive Truth-in-Lending disclosures. If you are shopping for a reverse mortgage, you will also receive a Good Faith Estimate (GFE) and a HUD-1 or HUD-1A Settlement Statement. Information about the cost of homeowner’s insurance can be found in Block 11 of your GFE.

Flood Insurance

Homeowners flood insurance is a separate property policy that covers direct water damage from external rising water, such as heavy rain, storm surges, or overflowing rivers. Standard homeowners insurance policies explicitly exclude flood damage, meaning a dedicated policy is required to recover financial losses from floods.

What It Covers

  • Building Structure: Foundations, staircases, electrical/plumbing systems, central air/heating, and built-in appliances like refrigerators or stoves.

  • Personal Contents: Furniture, clothing, electronics, and portable appliances (requires a separate contents policy).

What It Excludes

  • Vehicles: Cars and motor vehicles (handled by standard auto insurance comprehensive coverage).

  • Outdoor Property: Landscaping, decks, fences, patios, and hot tubs.

  • Living Expenses: Temporary housing while your home is being repaired.

  • Preventable Damage: Mold or mildew that could have been avoided by the homeowner.

How Policies Work

  • Providers: Policies are primarily issued through the federal National Flood Insurance Program (NFIP) managed by FEMA, or via private insurance carriers. You can check risk levels and community participation via FloodSmart.

  • Requirements: Mortgage lenders typically mandate flood insurance if your home sits in a high-risk FEMA flood zone with a government-backed loan.

  • Waiting Period: Most flood insurance policies have a standard 30-day waiting period before taking effect, so coverage must be bought well before a storm hits.

Earthquake Insurance

Homeowners earthquake insurance is a separate policy or endorsement added to a standard homeowners insurance policy. It pays to repair or rebuild your home, replace personal belongings, and cover temporary living costs if ground movement from a seismic event damages your property.

What is Covered

  • Dwelling Coverage: Repairs the main structure of your home, including foundations, walls, and a built-in garage.

  • Other Structures: Repairs detached buildings like fences, carports, or storage sheds.

  • Personal Property: Replaces damaged household belongings like furniture, electronics, and clothing.

  • Loss of Use: Pays for extra living expenses, such as hotel bills and food, if your home is unsafe to live in.

What is Not Covered

  • Fire Damage: Fires triggered by an earthquake are typically covered by your standard homeowners insurance policy, not the earthquake policy.

  • Vehicles: Cars or trucks damaged during an earthquake fall under your auto insurance.

  • Floods: Floods or tidal waves caused by seismic activity require a separate flood insurance policy.

Key Policy Features

  • High Deductibles: Earthquake deductibles are much higher than standard policies, usually set as a percentage (e.g., 10% to 20%) of the total dwelling coverage limit rather than a flat dollar amount.

  • State Availability: In high-risk states like California, specialized entities such as the California Earthquake Authority (CEA) work with private insurers to offer residential earthquake plans.