Of course you want to insure your home against disaster and major damage, but did you know that banks and lenders want to insure themselves against you, in a way, too? You can add your homeowners insurance to a plan you already have in place like your auto or life insurance for example, and it even can be paid as part of the mortgage payment and managed through a separate escrow account under your main loan.
Property taxes can be paid as part of your mortgage payment through the same escrow account too, but if they're underpaid, you might owe a lump payment after the property taxes are assessed each year. If the taxes are overpaid, you do get some money back, but this isn't necessarily a great thing: It could mean that your property value went down.
Banks require you get insurance on your actual mortgage, as well. Private mortgage insurance (PMI) is necessary if you don't put down at least a 20 percent or more down payment to make sure you are good on your obligations. This added insurance for the lender can cost you .5 to 1 percent of the loan amount each year, or about $500 or $1,000 on a $100,000 home [sources: CNN Money, Kiplinger's].