Homeowners insurance and your mortgage are two entirely separate agreements. Your mortgage is a loan from a lender. Your homeowners insurance policy is a contract with an insurance company that protects your home, belongings and personal liability from financial loss. That said, if your lender set up an escrow account, your insurance premium gets collected as part of your monthly mortgage payment and your lender pays your insurer directly when the bill comes due.
Is Homeowners Insurance Included in a Mortgage?
Updated: October 14, 2026
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Key Takeaways
Your lender is not your insurer: homeowners insurance and your mortgage are separate agreements, though most homeowners pay for both through the same escrow-based monthly payment.
Homeowners insurance covers your home, belongings and personal liability. Private mortgage insurance protects only your lender if you stop making your mortgage payments.
If your homeowners insurance lapses, your lender can purchase a force-placed policy on your behalf that's more expensive and covers only their financial interest.
Does Homeowners Insurance Come With Your Mortgage?
What Is an Escrow Account and How Does It Work?
An escrow account is a holding account your lender controls, used to collect and pay certain homeownership expenses on your behalf. Each month, a portion of your mortgage payment goes into that account to cover your homeowners insurance premium, property taxes and, if applicable, private mortgage insurance. When each bill comes due, your lender pulls from the balance and pays on your behalf, so none of those obligations are missed.
Lenders often require an escrow account when your down payment is less than 20%, since it gives them confidence that their investment stays insured and your taxes stay current. If you put down 20% or more, escrow may be optional, and you'd have the choice to pay your insurance and property taxes directly. Once you've built 20% equity in the home, you may be able to request escrow cancellation, though your lender ultimately gets to approve that.
SHOULD YOU PAY HOMEOWNERS INSURANCE THROUGH ESCROW OR DIRECTLY?
Paying through escrow removes the risk of missing a due date on your insurance or property taxes, since your lender handles both. Paying directly gives you more flexibility, including the ability to switch insurers without coordinating with your lender’s records. For most first-time buyers or anyone still carrying private mortgage insurance (PMI), escrow is the simpler choice.
Homeowners Insurance vs. Private Mortgage Insurance
Homeowners insurance and private mortgage insurance (PMI) often appear on the same monthly statement, but they serve different purposes and protect different parties. Homeowners insurance covers your financial exposure if your home is damaged or destroyed. PMI protects your lender if you stop making your mortgage payments.
Who it protects | You and your lender | Your lender only |
What it covers | Your home, belongings and personal liability from damage or loss | Your lender's investment if you stop making mortgage payments |
When it's required | For the life of your mortgage | When your down payment is less than 20% |
When it ends | As long as you keep the policy active | Once you've built enough equity in the home |
Paid through escrow? | Not part of the loan, but often collected through escrow | Not part of the loan, but often collected through escrow |
Do you choose the provider? | Yes | No — your lender arranges it |
When Can You Stop Paying PMI?
You can request PMI cancellation once you've built enough equity in your home, and lenders are required to drop it at a certain point even without a formal request. When PMI comes off, that portion of your monthly escrow payment disappears, which reduces your overall payment without any change to your homeowners insurance coverage. If you're not sure where you stand on equity, your lender can tell you how far off you are and walk you through what the cancellation process looks like.
How Much Does Homeowners Insurance Add to a Mortgage Payment?
The amount homeowners insurance adds to your monthly payment depends on your coverage level, your home’s age and construction and where you live, so there’s no single figure that applies across the board. Your lender estimates the annual premium when setting up escrow and collects that amount monthly, then reviews the account each year to adjust for any changes. If your actual premium comes in higher than what was collected, you’ll owe the difference. If you switched to a lower-cost policy, your monthly payment drops at the next adjustment.
What Happens If You Don't Have Homeowners Insurance on a Mortgaged Home?
Your mortgage agreement requires active homeowners insurance throughout the life of the loan, and your lender can respond if that requirement isn’t met. Here’s what can happen if your coverage lapses:
Your lender can purchase a policy on your behalfThis is called force-placed or lender-placed insurance. It protects only the lender’s financial interest in the property. Your belongings and personal liability aren’t covered.
Force-placed insurance is almost always more expensive than a policy you’d shop for yourself, and your lender can require you to pay for it through your escrow account without your input.
Your loan can move toward defaultGoing without homeowners insurance is often a direct violation of your mortgage agreement, and lenders can treat it as a default event.
The fastest fix is getting your policy reinstated and sending your lender proof of active coverage. Once lender-placed insurance is removed, your payment goes back to normal.
Is Homeowners Insurance Included in Closing Costs?
Most lenders require you to pay the first year of homeowners insurance at closing. This way, coverage begins immediately and protects both you and your lender from financial loss if damage occurs. Some lenders allow you to pay this through escrow instead of upfront at closing.
Is Home Insurance Included in Mortgage: Bottom Line
Homeowners insurance isn’t part of your mortgage loan, but the two are financially connected from the day you close. Most lenders require you to pay your premium through an escrow account, where it gets collected monthly alongside property taxes and PMI. PMI is separate from homeowners insurance and serves a different function. It protects your lender if you default. You aren’t covered. Once you’ve paid down enough of the loan, PMI falls away and your monthly payment drops with it.
Home Insurance in Mortgage Payment: FAQ
No. Lenders require homeowners insurance to protect their financial stake in the property, and that requirement stays in place for the life of the loan. If your coverage lapses, your lender can purchase force-placed insurance on your behalf, often at a higher cost, and require you to pay for it through your escrow account.
Lender-placed insurance, also called force-placed insurance, is a policy your lender purchases on your home when your homeowners coverage lapses. It protects only the lender’s financial interest in the property. Your belongings and personal liability aren’t covered. It’s also almost always more expensive than a policy you’d buy on your own, so keeping your existing coverage active is the better path.
Yes. Your lender doesn't control which insurer you use, only that you have active coverage. If you find a better rate with a different insurer, notify your lender with proof of the new policy so they can update their records and pay the right insurer at renewal.
Paying through escrow doesn’t change what you owe in premiums. Your lender may collect a small buffer above the estimated cost to prevent an escrow shortfall, but you’re entitled to a refund if the account builds beyond a certain amount in surplus. The premium itself is set by your insurer. Your lender doesn’t set it.
Most lenders require the first year of homeowners insurance to be paid in full before closing, so you'll likely see it as an upfront cost at the time of purchase. If you're paying through escrow going forward, you may also deposit a few months of premium into the account at closing to seed it. After the first year, the ongoing premium gets collected monthly as part of your regular mortgage payment.
About Mark Fitzpatrick
Mark Fitzpatrick is a licensed Property and Casualty (P&C) Insurance Producer and MoneyGeek's resident expert in insurance and economics. In nearly a decade covering the insurance market at LendingTree and MoneyGeek, he's analyzed hundreds of carriers and millions of rates across auto, home, renters, health and life insurance.
His work has appeared in The Washington Post, The New York Times and NPR. He draws on independent cost and consumer experience data, and no insurance company partnerships affect his recommendations.
Mark studied at Boston College and later earned a master's in economics and international relations from Johns Hopkins University. He worked in financial risk management at State Street before joining MoneyGeek. He's also a five-time “Jeopardy!” champion.