Mortgage Insurance Requirements: Homeowners, Flood, PMI, and MIP Explained

Every mortgage comes with insurance requirements — some protect the lender's collateral, others protect you, and some protect the lender against your default. Understanding exactly what you are required to carry — and what each policy covers — eliminates closing day surprises.

Homeowners Insurance (Hazard Insurance)

Required by every lender on every mortgage. Covers the structure against fire, wind, hail, and other named or all-risk perils depending on the policy form. The lender requires a minimum dwelling coverage amount sufficient to rebuild the structure and names the lender as an additional insured.

You shop for and choose your homeowners insurance. Your agent provides a binder or declarations page to the lender before closing.

Flood Insurance

Required by lenders for properties in FEMA Special Flood Hazard Areas — Zone A or Zone V flood zone designations. Even one square foot of the structure in a flood zone triggers the requirement. Flood insurance is a separate policy — standard homeowners insurance does not cover flood damage.

Available through FEMA's National Flood Insurance Program (NFIP) or private flood carriers. In high-risk flood zones, premiums can be substantial — always obtain a flood insurance quote before going under contract on a property in or near a flood zone.

PMI (Private Mortgage Insurance)

Required on conventional loans with less than 20% down. Protects the lender if you default. You pay the premium but receive no direct benefit. Removed when you reach 20% equity — request cancellation at 80% LTV or wait for automatic cancellation at 78%.

FHA MIP (Mortgage Insurance Premium)

Required on all FHA loans. Includes a 1.75% upfront premium and an annual premium of approximately 0.55 to 1.05% depending on LTV and loan term. Unlike PMI, FHA MIP typically cannot be removed — it lasts the life of the loan for most borrowers. Refinancing into a conventional loan is the primary way to eliminate FHA MIP once you have sufficient equity.

At East Coast Mortgage, we walk every borrower through all insurance requirements and connect you with qualified insurance providers before closing. Book a call to get started.