Do I ever have to buy property or flood insurance from my lender?
No. You may shop for property or flood insurance. But if you do not get homeowners insurance, or let your policy lapse, your lender may insure your property and charge you for it. This is called force-placed or collateral protection insurance. It is usually much more expensive than a regular policy. A lender may also buy force-placed flood insurance for homeowners in flood zones who do not have adequate flood insurance to meet the legal minimum required to protect the property.
If you can obtain your own insurance, it will generally be less expensive than the insurance bought by your lender for you. In some cases of force-placed insurance, the policy that the lender buys protects their interest but not your interest in the property. If you believe that any force-placed insurance was purchased in error, you should contact your lender immediately and give proof of your current insurance policy.
In addition, if you fail to pay any of your property-related costs, your lender may add the amounts to your loan balance, add an escrow account to your loan, or require you to pay for insurance on your home that your lenders buys on your behalf, which likely would be more expensive and provide fewer benefits than what you could obtain on your own.