Homeowners insurance is mandatory because the house is the collateral on the debt that you owe the lender. If you didn't pay your mortgage then the bank has the right to foreclose on your property and sell it to recoup the money that they lent you. The lender protects their collateral by being listed on your homeowner policy as "Loss Payee". (The one paid when a loss happens). If their collateral (your home) burns up in a fire, and then someone stops paying their mortgage, they would have no asset and no mortgage payments coming in.
Item of note: If you decide that you don't want to have homeowners coverage on the home, the lender can add insurance (that only protects their interest in the home) and make you, the homeowner/mortgagee, pay for it on top of their mortgage payment. It is one of the many clauses that you initialed when you signed your mortgage agreement.
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Item of note: If you decide that you don't want to have homeowners coverage on the home, the lender can add insurance (that only protects their interest in the home) and make you, the homeowner/mortgagee, pay for it on top of their mortgage payment. It is one of the many clauses that you initialed when you signed your mortgage agreement.