Homeowners insurance coverage protects the mortgage lender's investment from damages caused by inclement weather, fire, or vandalism. The mortgage lender may require you to get separate flood insurance coverage if your home is located in a high-risk flood zone. In most cases, the lender will give a scope of coverage requirement that will show what the homeowners policy must cover.
The policy must cover fire, wind, hail, and vandalism at the least. Also, the homeowners policy will be required to have enough coverage to fully replace the home if it gets destroyed as a result of fire or other disasters. Mortgage lenders require homeowners insurance as a means to ensure their property is fully protected against damage. They also require this to make sure the borrower can pay down the mortgage if the home gets destroyed.