Homeowners insurance
A policy covering damage to your home and belongings, required by lenders and usually collected monthly into escrow as part of your payment.
What does homeowners insurance mean?
Lenders require homeowners insurance to protect the collateral behind the loan — the house itself — against fire, storms, theft and liability. Like property tax, the annual premium is typically split into your monthly payment and held in escrow, then paid when due. In high-risk areas the cost can be substantial, so factor it into the full PITI, not just principal and interest, when judging what you can afford.
Frequently asked
Is homeowners insurance required for a mortgage?
Yes — lenders require it to protect the home securing the loan, and it is typically collected into escrow and paid with your monthly payment. Once the mortgage is paid off it is no longer required, though staying insured is strongly advised.
Related terms
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