Is Homeowners Insurance Included in a Mortgage?

Home insurance is often included in your mortgage payments through an escrow account, which most lenders require. An escrow account is a savings account managed by your mortgage servicer that pays annual or biannual expenses like property taxes and insurance on your behalf. This arrangement makes managing housing expenses easier.

With an escrow account, expenses for principal, interest, taxes and insurance are combined into one monthly payment. The lender or loan servicer prorates these expenses and adds them to your mortgage payment. Paying your property taxes and home insurance disbursements through escrow keeps your premiums current and your lender's investment secure.

Depending on your lender, you might need to pay for the first year of home insurance as part of your closing costs. This protects the property from day one and shields you and your mortgage lender from major financial loss if damage occurs. Alternatively, you can ask your lender if you can pay for your home insurance through your escrow account.

If you cancel your home insurance without notifying your lender, they may add force-placed insurance to your escrow. This type of policy often costs more and offers limited coverage.

A cancellation without a replacement policy can also cause a coverage lapse. This puts you at risk and may violate your mortgage agreement.

To avoid issues, send your lender the new policy details before canceling the old one. Confirm they update your escrow account with the correct information.

While you can pay your home insurance yourself instead of through an escrow, whether your lender will allow this depends on your type of mortgage, down payment size and equity. If you get the option to pay it yourself, you'll have greater control over your finances. Paying premiums directly to the insurer gives you more flexibility and understanding of your policy and makes it easier to switch providers.

You can choose how to pay, whether online or through the mail, and select your payment frequency (monthly, quarterly or yearly). If you prefer a more hands-on approach to financial management, ask your lender if you can pay your home insurance yourself.

Yes, you can switch providers even if your insurance is paid through escrow. Follow these steps to avoid coverage gaps or escrow issues:

Home insurance remains essential financial protection even after your mortgage is paid off. Your home is one of your biggest financial assets, and without insurance, you would bear the full cost of any damage or loss. While mortgage lenders require homeowners insurance, you should continue coverage after paying off your home to protect against damage costs.

You'll encounter two types of insurance when buying a home: homeowners insurance and mortgage insurance. Mortgage insurance, also called PMI, protects lenders if you can't repay the loan. Homeowners insurance protects you from damage to your home and belongings.

The homeowner or borrower purchases both types of insurance. Below are the key differences:

Understanding how home insurance works with mortgage payments can help you manage your financial commitments. Home insurance payments are usually included in your mortgage payment through an escrow account, which most lenders require.

Your lender sets up the escrow account to collect funds for property taxes and insurance, then pays these bills when they're due. Knowing how escrow manages your insurance payments helps you navigate your financial responsibilities.

Below are answers to frequently asked questions about homeowners insurance and mortgages.

Why Trust MoneyGeek?

MoneyGeek analyzed quotes from multiple insurance providers across the U.S. using a profile that reflects the average homeowner. By considering different locations and companies, we aim to give a reliable estimate of what homeowners can expect to pay, showing why it’s important to compare rates.

Methodology

MoneyGeek evaluated homeowners insurance carriers using insights and premiums from the official databases of Quadrant Information Services.

Homeowner Profile

For our analysis, we created a sample homeowner profile with the following characteristics: 

• Good credit score (769–792)
• Home constructed in 2000
• Wood-frame construction
• Composite shingle roof

Homeowners Insurance Coverage Details

Unless otherwise specified, we used the following coverage limits to collect quotes for our comparison:

• $250,000 in dwelling coverage
• $125,000 in personal property coverage
• $200,000 in personal liability coverage
• $1,000 deductible

We also compiled data for policies with broader coverage to determine the best companies for insuring expensive homes, increasing limits to $1 million in dwelling coverage, $500,000 in personal property coverage and $1 million in liability coverage.