If you don't pay the insurance, the lender may put a policy in place at your expense and it may only cover the banks interest for replacement value. It is important to note that the policy put in place by the bank may not protect from liability like most policies. If someone injures themself at your home you would not be protected if their were a lawsuit. At all costs I would recommend making sure a full and proper liability and replacement insurance policy is in full on the home. Otherwise, you could be exposing themselves to some huge potential disaster financially. If there is one thing i wouldn't mess around with, it is the insurance. I actually know someone that was in foreclosure, did not pay the insurance policy, and then got sued when a worker got hurt at the home. There is now a pending lawsuit that is causing even more disaster for him and his family. Insurance is more than just replacement if the home is damaged, the liability component is crucial.