Most mortgage companies and lenders will require the owner to carry full insurance at least during the time that the loan is open. This provides protection to the lender by preventing the property or home being lost in a law suit. The financing company will stipulate the minimum amount of insurance that is required.
Home owners insurance packages will cover most types of insurance claims but do not cover floods or earthquakes. In areas where flooding or earthquakes are problematic a separate policy for these disasters can be purchased.