Texas law doesn't require homeowners insurance, but your mortgage lender will. The Texas Department of Insurance (TDI) puts it plainly: if you still owe money on your home, your lender will require coverage. For a purchase, that means you choose a policy, your agent sends proof to the lender before closing, and the first year's premium is usually paid at closing, with the renewal paid later from your escrow account. Texas law also protects you here: a lender can't make you use a particular agent or insurer, must accept a properly issued binder, and can't require coverage above the replacement value of the home and contents.
I'm Taylor Ring, a Mortgage Loan Officer with Fairway Independent Mortgage Corporation (The Wood Group) in Belton. I don't sell insurance, and I don't quote premiums. What I do see is how insurance moves a buyer's payment and closing timeline in Temple, Killeen, Georgetown, and Waco, so this guide covers the lender side. It's built from TDI, the Texas Insurance Code, the CFPB, Fannie Mae, HUD, and TREC, read October 25, 2026.
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Is Homeowners Insurance Required in Texas?
| Situation | Required? | Source |
|---|---|---|
| You own the home free and clear | No state law requires it | TDI |
| You have a mortgage | Yes, your lender will require it | TDI, CFPB |
| Home is in a FEMA high-risk flood zone with a mortgage | Flood insurance is required too | TDI |
| You let coverage lapse | Your servicer can buy force-placed insurance and charge you | CFPB |
The CFPB adds that homeowners insurance is sometimes called "hazard insurance," and that it is not the same as mortgage insurance. Mortgage insurance protects the lender if you stop paying; homeowners insurance protects the house. If you're trying to get rid of mortgage insurance, see how to remove PMI.
What a Texas Homeowners Policy Covers
TDI says most Texas home policies combine six coverages:
- Dwelling: damage to the house from a covered cause
- Personal property: furniture, clothing, and other belongings
- Other structures: detached garages, sheds, and fences
- Additional living expenses: rent, food, and other extra costs if you have to move out during covered repairs
- Personal liability: costs if you're legally responsible for injuring someone or damaging their property
- Medical payments: medical bills of people hurt on your property
Usually Covered vs. Usually Not
| Most policies cover | Most policies don't cover |
|---|---|
| Fire and lightning | Flooding |
| Sudden and accidental release of water or smoke | A continuous water leak, and mold except from a covered risk |
| Explosion, theft, vandalism, riot | Termites, insects, rats, or mice |
| Aircraft and vehicles | Wear and tear |
| Windstorm, hurricane, and hail (not on the Gulf Coast) | Earthquakes or earth movement |
| Wind or hail damage to trees and shrubs |
Source: TDI's home insurance guide. Coverage varies by company, so read your policy.
Flood is the big gap. TDI notes that more than half of homes flooded by Hurricane Harvey were outside designated flood zones, and most flood policies have a 30-day waiting period. Ask about flood coverage when you shop, not after the forecast turns.
What Your Mortgage Lender Requires
Every loan program has its own rules, and lenders can add their own. Here's what the main official guides say.
Conventional Loans (Fannie Mae)
Fannie Mae's Selling Guide, topic B7-3-02 (updated August 5, 2026), says a policy on a one- to four-unit home should be written on a "Special" coverage form or equivalent and must cover at least:
- Fire or lightning, explosion, smoke
- Windstorm, including named storms, and hail
- Aircraft, vehicles, and riot or civil commotion
Other Fannie Mae requirements:
- Replacement cost coverage on the home. Roofs must be insured but don't have to be on a replacement cost basis.
- Maximum deductible of 5% of the coverage amount. If wind or another peril has its own deductible, each one must be 5% or less.
- A rated insurer. Fannie Mae lists minimum ratings, such as AM Best "B" or better or Demotech "A" or better.
- The lender's mortgagee clause, with the lender's name followed by "its successors and/or assigns," and everyone on title named as an insured.
- Written notice to you and the lender before the insurer can cancel.
- FAIR Plan coverage is acceptable when it's the only coverage available.
Fannie Mae also says you have the right to choose your insurer, as long as the policy meets its requirements.
FHA Loans
HUD's Handbook 4000.1 lists evidence of hazard insurance among the property documents for an FHA loan, and evidence of flood insurance if the home is in flood zone A or V. HUD's escrow rule requires FHA borrowers to pay toward hazard insurance as part of the monthly payment. My FHA loan requirements in Texas guide covers the rest of the program.
What Texas Law Says Lenders Can and Can't Do
Chapter 549 of the Texas Insurance Code sets lender rules that apply to Texas home loans:
- You pick the agent and company. A lender may not require a policy from a particular agent or insurer, or from a particular type of agent or insurer (Sec. 549.052).
- A binder counts. A lender must accept an insurance binder as evidence of coverage if it's issued by an appointed licensed agent, comes with proof the premium was paid, and will be replaced by the actual policy within 30 days (Sec. 549.055). TDI defines a binder as a temporary contract that proves coverage until you receive the permanent policy.
- No over-insuring. A lender can't require coverage above the replacement value of the dwelling and its contents, and can't count the land in that value (Sec. 549.0551).
- Switching companies later: a lender can't charge more than $10 to substitute a new policy, and can't demand proof of a renewal policy earlier than the 15th day before your current one ends (Secs. 549.051 and 549.054).
- What lenders can require: a policy with a fixed end date, adequate coverage, reasonable notice before cancellation, and an insurer authorized in Texas (Sec. 549.056).
Homeowners Insurance at a Texas Closing
1. Shop Early
The CFPB says you can shop for homeowners insurance separately and choose the provider and plan that fits. Start once you're under contract, or sooner. Your Loan Estimate shows an insurance estimate on page one under "Projected Payments," and I'd rather replace my estimate with a real quote than guess.
2. Watch the Option Period and the Financing Addendum
Insurers may inspect the roof and check the home's claims history. TDI says most companies use the CLUE database, which shows a home's claims for the last seven years, regardless of who owned it. Ask your agent to quote during the option period so a surprise doesn't land after it ends.
The TREC Third Party Financing Addendum also lists "insurability" under Property Approval: if the lender determines the property doesn't meet its underwriting requirements, you may be able to terminate by the 3rd day before the Closing Date with a written lender statement.
3. Send Proof to the Lender
Your agent sends the binder or declarations page and an invoice or paid receipt. Fannie Mae says the lender must verify a valid policy and keep acceptable evidence; a certificate of insurance signed by the insurer can stand in for the full policy. Check that it shows:
- The lender's mortgagee clause exactly as provided
- Every borrower on title as a named insured
- Dwelling coverage at replacement cost, and deductibles within the program's limits
- An effective date on or before the closing date
4. Pay the Premium at Closing
The TREC resale contract (Paragraph 12A) lists "required premiums for flood and hazard insurance" and reserve deposits for insurance among the buyer's expenses. Those show up as prepaid items in my closing costs in Texas guide.
5. Escrow Pays the Renewal
Most buyers pay insurance through escrow: the servicer collects one-twelfth of the yearly premium each month and pays the renewal. If the premium rises, so does your payment at the next escrow analysis. My guide to what escrow is in a mortgage walks through cushions, shortages, and refunds.
Deductibles and Coverage Terms That Matter in Central Texas
Wind and Hail Deductibles
TDI says a deductible can be a dollar amount or a percentage, and it advises asking whether the wind and hail deductible is different from the deductible for other damage.
Hypothetical example: A home has $300,000 of dwelling coverage and a 2% wind and hail deductible. That deductible is $6,000 per claim. If hail does $5,000 of roof damage, the policy pays nothing. Made-up numbers to show the math, not a quote.
TDI also says moving from a $500 to a $1,000 deductible can save as much as 20% on premium. A higher deductible can be a reasonable trade, as long as you keep that amount in savings after closing.
Replacement Cost vs. Actual Cash Value
TDI's example: a 10-year-old roof that would cost $10,000 to replace today, with a $2,000 deductible.
| Coverage type | Insurer pays | You pay |
|---|---|---|
| Replacement cost | $8,000 | $2,000 |
| Actual cash value (roof valued at $7,000 after depreciation) | $5,000 | $5,000 |
TDI notes some companies switch older roofs to actual cash value at renewal, so check each renewal for roof changes.
Coverage Amount
TDI says most companies require you to insure the house for at least 80% of its replacement cost, and some require 100%. Replacement cost is the cost to rebuild, not the sales price, and Texas law keeps the land out of what a lender can require.
What Moves the Premium
TDI lists the factors most companies use:
- The home's age and condition. Companies can't refuse you based only on age or value, but they can charge more.
- Replacement cost and construction materials (brick or stone usually costs less to insure than all-wood).
- Location and nearby fire protection.
- Claims history on you and the house.
- Credit score, though a company can't turn you down based only on credit.
Discounts TDI mentions: monitored alarms, sprinklers, impact-resistant roofs, newer homes, bundling, and three claim-free years. TDI's HelpInsure.com shows which discounts companies offer.
Coastal Wind, the FAIR Plan, and Other Options
- TWIA (Texas Windstorm Insurance Association): sells wind and hail coverage in the 14 first-tier coastal counties and parts of Harris County east of Highway 146. None of the Central Texas counties I serve are on that list, but it matters if you're also buying a coast property. TWIA requires a denial from a private insurer and, for most structures, a TDI windstorm certificate of compliance.
- Texas FAIR Plan Association: TDI says you can get FAIR Plan coverage if you can't find a Texas-licensed company and at least two companies have turned you down. Call 800-979-6440 or your agent.
- Surplus lines companies: out-of-state insurers that must meet Texas standards. TDI says FAIR Plan and surplus lines coverage costs more than a standard company.
If Your Coverage Lapses or Gets Canceled
Force-placed insurance is the expensive outcome. The CFPB says that if you stop paying for coverage or let it expire, your servicer can buy insurance and charge you. It usually protects only the lender, can cost twice as much, and federal law requires the servicer to notify you at least 45 days before charging you.
Texas notice rules (TDI):
- A company must give 10 days' notice before canceling.
- A company must give 60 days' notice of nonrenewal if you bought or renewed your policy in 2024 (30 days if you bought or renewed in 2023 or earlier), and must tell you why if you ask.
- If you cancel or are canceled, unearned premium must be refunded within 15 days.
After a claim: TDI says repair checks are made out to you and your mortgage company. The mortgage company may hold the money and release it as work is done, and once it has the information it needs, it must release funds within 10 days.
Frequently Asked Questions
Is homeowners insurance required in Texas?
No Texas law requires homeowners insurance, but if you have a mortgage your lender will require it. The Texas Department of Insurance says lenders require coverage while you owe money on the home, and if your home is in a designated flood zone your lender will also require flood insurance.
Can my lender make me use a certain insurance company in Texas?
No. Texas Insurance Code Section 549.052 says a lender may not require you to buy a policy from a particular agent or insurer. The lender can require that the policy meets its coverage requirements, comes from an insurer authorized in Texas, and gives the lender reasonable notice before cancellation.
What is an insurance binder at closing?
A binder is a temporary insurance contract that proves coverage until the permanent policy is issued. Under Texas Insurance Code Section 549.055, a lender must accept a binder if it is issued by an appointed licensed agent, comes with proof the premium was paid, and will be replaced by the original policy within 30 days.
What deductible does a mortgage lender allow?
It depends on the loan. For conventional loans sold to Fannie Mae, the maximum deductible is 5% of the property insurance coverage amount, and a separate wind or hail deductible must also be 5% or less. Other programs and lenders can have their own limits, so check before you choose a deductible.
Does homeowners insurance cover flooding in Texas?
Most Texas homeowners policies do not cover flood damage. Flood coverage is a separate policy from the National Flood Insurance Program or a private insurer, and the Texas Department of Insurance says most flood policies have a 30-day waiting period before coverage starts.
Getting Ready to Close on a Central Texas Home?
I'll build your payment estimate with a real insurance quote once you have one, check the binder against your loan's requirements, and keep the closing on schedule.
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Related Guides
- What Is Escrow in a Mortgage?
- Closing Costs in Texas
- Home Inspection in Texas
- Texas Option Period and Option Fee
- Mortgage Preapproval in Texas
- How Much House Can I Afford in Texas?
Sources
- Texas Department of Insurance: Home insurance guide, What to know about deductibles, Insurance and your roof, Home insurance glossary, and windstorm inspections
- Texas Insurance Code Chapter 549, Subchapter B (Secs. 549.051 to 549.056)
- CFPB: What is homeowner's insurance? Why is it required?, force-placed insurance, and its consumer advisory on cancellations and cost increases
- Fannie Mae Selling Guide: B7-3-01, B7-3-02, B7-3-07, and B7-3-08
- HUD Handbook 4000.1 and 24 CFR 203.23
- Texas Windstorm Insurance Association coverage and eligibility
- TREC Resale Contract 20-19 (Paragraph 12A) and Third Party Financing Addendum 40-11 (Paragraph 2B)
Taylor Ring, NMLS #2809683 | Fairway Independent Mortgage Corporation, NMLS #2289 | The Wood Group of Fairway, 127 Lake Rd Ste 300, Belton, TX 76513 | Equal Housing Opportunity. This is not a commitment to lend. All loans are subject to credit and property approval and program guidelines, and approval, rates, and program availability are not guaranteed. Taylor Ring is a mortgage loan officer, not a licensed insurance agent; this article does not quote, sell, or recommend insurance policies or premiums. It is general information, not legal or insurance advice, and is not affiliated with or endorsed by TDI, TWIA, the Texas FAIR Plan Association, the CFPB, Fannie Mae, HUD, TREC, or any government agency. Ask a licensed insurance agent about coverage for a specific property.