Quick answer
Usually, yes, through escrow. Most lenders add one-twelfth of your yearly homeowners insurance premium and property taxes to each monthly mortgage payment. That money goes into an escrow account, and the servicer pays the bills when they come due.
The policy itself is still yours: you choose the insurer, and your lender requires coverage for as long as you have the loan. FHA and USDA loans require escrow. Some conventional loans with enough equity let you pay the insurer yourself.
Rules on this page were verified in . Escrow requirements are subject to federal rules, HUD, USDA, VA, Fannie Mae, Freddie Mac and lender guidelines and may change.
How does escrow pay your homeowners insurance?
- At closing, you pay the first year’s premium, and the lender usually collects a few months of insurance and taxes to start the escrow account.
- Each month, part of your payment goes into escrow, alongside principal and interest and any mortgage insurance.
- When the bill is due, the servicer pays your insurer and the county trustee from the account.
- Once a year, the servicer reviews the account. Federal rules let it keep a cushion of up to one-sixth of the year’s escrow bills, about two months. If premiums or taxes went up, your payment goes up. A surplus of $50 or more is refunded.
Source: Regulation X §1024.17, escrow accounts; CFPB, What is an escrow account.
Can you pay homeowners insurance yourself instead?
| Loan | Escrow for insurance and taxes |
|---|---|
| FHA | Required |
| USDA | Required |
| VA | Usually required by the lender |
| Conventional | Often can be waived with enough equity (commonly 20% or more), sometimes for a fee or a pricing change |
| Higher-priced loans | Required for at least five years under Regulation Z §1026.35 |
Program terms are subject to agency and lender guidelines and may change. If you skip escrow, you pay the insurer and the property taxes directly, on time, every year.
What insurance does your lender require?
- Homeowners insurance covering the house, with the lender named as mortgagee. Your lender needs the declarations page before closing.
- Flood insurance if the home is in a FEMA Special Flood Hazard Area. This is a separate policy; see FloodSmart.
- A condo master policy through the association if you’re buying a condo, plus your own walls-in policy.
If your coverage lapses, the servicer can buy force-placed insurance and charge you for it. It usually costs more and protects only the lender. Federal rules require two written notices before you’re charged (Regulation X §1024.37).
Homeowners insurance is a different thing from mortgage insurance, which protects the lender on low-down-payment loans. For the full comparison, see mortgage insurance vs. homeowners insurance.
Homeowners insurance and escrow FAQ
Why did my mortgage payment go up when my rate is fixed?
Usually because your homeowners insurance premium or property taxes rose. Those are paid from escrow, so the annual escrow review raises the monthly amount to cover them. Principal and interest on a fixed-rate loan stay the same. Shopping your insurance can lower that part.
Can I switch insurance companies if I have escrow?
Yes. Buy the new policy first so there’s no gap, send the declarations page to your servicer, and then cancel the old policy. Any refund from the old insurer usually comes to you. Tell the servicer before the next bill so it pays the right company.
Do I need homeowners insurance after the mortgage is paid off?
No law requires it once there’s no lender, but it’s still wise. Without coverage, a fire, storm or lawsuit would come out of your own savings. After payoff, the escrow account closes and you pay the insurer and the county directly.
How much homeowners insurance do I pay at closing?
Typically the first full year’s premium, plus a few months collected to start the escrow account. Both appear on your Loan Estimate and Closing Disclosure. Your insurer sets the premium, so get quotes early in the process.
Where these rules come from
| Rule | Source | As of |
|---|---|---|
| Escrow cushion, annual analysis and refunds | Regulation X §1024.17 | Retrieved Oct 26, 2026 |
| Escrow on higher-priced mortgage loans | Regulation Z §1026.35 | Retrieved Oct 26, 2026 |
| Force-placed insurance notices | Regulation X §1024.37 | Retrieved Oct 26, 2026 |
| Why lenders require homeowners insurance | CFPB, Ask CFPB | Retrieved Oct 26, 2026 |
| Flood insurance requirement | FEMA, FloodSmart (NFIP) | Retrieved Oct 26, 2026 |
Related guides
- Mortgage insurance vs. homeowners insurance.
- Closing costs vs. down payment.
- How much house can I afford?
- Davidson County mortgage guide.
- About Christopher Armantrout, the licensed originator who wrote this page.
Questions about escrow on your loan? Talk to Valor Mortgage.
I’ll show you what your escrow would collect for insurance and Tennessee property taxes, what you’d bring to closing, and whether your loan lets you pay the insurer yourself.
Call me at (615) 671-9178. That’s the fastest way to get a straight answer on what you’d qualify for and what your escrow would cover each month.
If it’s after hours, grab a time on my calendar. Pick a slot that works and I’ll call you then.
If your life is too chaotic for a phone call right now — I understand — start an application and I’ll review it and reach out with a plan.
Valor Mortgage, LLC · Christopher Armantrout, Mortgage Loan Originator, NMLS #1210804 · Valor Mortgage, LLC is powered by Encore Lending Group, LLC, NMLS #1249911 · Licensed in Tennessee · Equal Housing Opportunity
724 S Main St, Springfield, TN 37172 · (615) 671-9178 · christopher@valor.mortgage · NMLS Consumer Access
The dollar figures on this page are illustrative examples for general information only and are not an offer, a rate quote, or a commitment to lend. Actual interest rates and APRs vary based on loan program, borrower qualifications, property, market conditions and other factors. Program fees, limits and terms are set by the agencies named above and change without notice; all loans are subject to credit approval, income verification and property appraisal. Not all applicants will qualify.