What are the Basic Requirements for Home Insurance?

Homeowner’s insurance provides coverage for your home and possessions in the event of a covered loss. When it comes to policy, a minimum amount of coverage is normally required by finance companies before a home loan is finalized. There are other things to consider when it comes to basic requirements for home insurance depending on state or city regulations.

Protecting the lender

When you obtain a mortgage to purchase a home, the lender will have basic requirements for an insurance policy to protect the investment the company has made. Without this insurance, if your house is destroyed, you are still liable for the loan but have no financial reimbursement to cover the loan. You would be without a home and still have an outstanding mortgage.

The basic requirements for home insurance will include protection from losses due to fire and storm damage. Basic coverage does not always include all events of nature. In certain areas, you may be required to have an additional policy for flood or earthquake related damages.

Some mortgage lenders will set requirements for the maximum amount of your deductible on your policy. This can be based on your income to debt ratio. Lenders may also require a set amount of liability coverage in the event someone is injured on your property.


Some states or individual cities have basic requirements in place for homeowners or renters when it comes to certain pets. If you are the owner of an animal that is classified as dangerous, you may be required to have carry liability insurance. Even without this requirement, it is wise to check your policy to determine your coverage. Some policies may not provide liability protection due to injuries caused by pets.

Additional considerations for home insurance

Even if you own your home with no mortgage, you should have a basic homeowners policy. The insurance will protect your investment. If you do not have a mortgage, you may consider having a higher deductible for covered losses. You still want to be financially protected in the event that your house or the contents are destroyed.

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