Insurance that covers damage to your home and personal property from covered perils, required by all mortgage lenders.
Full Definition
Homeowners insurance (hazard insurance) is required by all mortgage lenders to protect their collateral. A standard HO-3 policy covers the structure against all perils except those explicitly excluded (flood and earthquake are common exclusions), personal property against named perils, liability protection, and additional living expenses if the home becomes uninhabitable. Premiums are collected monthly via escrow and paid annually by the servicer. Lenders require minimum coverage equal to the lesser of the loan amount or the cost to rebuild the structure. Flood insurance is separate — required by lenders in FEMA-designated high-risk flood zones. Earthquake insurance is also separate and more common in California and the Pacific Northwest.
Related Terms
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