Homeowner's insurance will protect you against both known and unknown perils that could wipe you out financially. Standard homeowner's insurance typically covers: coverage for your home's structure, personal belongings, additional living expenses in case you are temporarily displaced from your home (due to an insured disaster or fire), and liability protection.

Choosing homeowner's insurance is nowhere near as nerve-racking as negotiating to buy a home, signing up for a mortgage, or sitting through a closing. Lenders will not even consider offering you a mortgage if you do not have homeowner's insurance from day one — they aren't willing to take the chance on their investment. You will be required to make payments for as long as your home is in their portfolio.

With many lenders, your mortgage payment will include homeowner's insurance and sometimes property taxes. If you buy the insurance on your own and let your policy lapse, the insurance company will send a copy of the cancellation to both you and your lender. Your lender could start foreclosure proceedings if the coverage is not reinstated quickly.