Why does the lender require annual proof of insurance?

You, as the borrower, sign and enter into a mortgage agreement when you obtain financing for your property. The mortgage agreement may make you responsible for maintaining insurance on the property (which is the collateral for the loan) until you pay off the mortgage loan in full. If you fail to insure your home in the amounts and for the periods the lender requires, the mortgage agreement may allow us to protect its collateral and insure the property at your expense. The mortgage agreement requires you to maintain both a homeowners insurance policy with no exclusions for wind, hail, hurricane coverage AND a separate flood insurance policy (for a home located in a Special Flood Hazard Area).