Homeowners insurance is not a requirement in many states. However, most banks and mortgage lenders insist you carry insurance. Why do they care? Insurance protects the lender's investment in case the house is damaged. Lenders typically want homeowners to carry enough insurance to cover the amount of the mortgage [source: Keefer].
If, for some reason, you cannot purchase insurance, the mortgage company or bank will supply a policy called forced coverage. Whatever you do, try to buy a homeowner's policy yourself. Forced coverage policies are extremely expensive and protect only the interests of the mortgage company, not you, your family or your stuff [source: New Jersey Department of Banking & Insurance].
Also, keep up on your premium payments. If you let your insurance lapse, the mortgage company will insure the home for you. The lender can force you to pay the higher premium until you get your own homeowner's policy [source: National Association of Insurance Commissioners].