Is there a difference between homeowner's insurance and mortgage insurance?

Question

Is there a difference between homeowner's insurance and mortgage insurance?

Answer 1

homeowners insurance is you (the homeowner) insuring your property (i.e. in case of theft, natural disasters, etc.) that way you will still have a home after the case.

i think you mean private mortgage insurance (PMI) in which it is the lender insures their investment in case you don't pay the money back (usually when you don't put 20% down or you haven't paid of at least 20% of your price)

hope this helps!

Answer 2

Yes, huge difference.

Homeowner's insurance (also called hazard insurance) is required insurance that you must get to protect your house from damage, and to protect your belongings.  This insurance is for your protection; but the bank requires that you get it because the loan is backed by the house, so if anything happens to it then they want it to be covered.

Mortgage insurance (also called pmi - private mortgage insurance) is a monthly payment added to your mortgage if you put less than 20% down on the house.  This insurance is for the bank's protection because you are a risky borrower if you but less than 20% down.  They will continue charging this (usually somewhere between $50 and $150) until you have 20% equity in the house.  Keep in mind that this will take a long time though because in the beginning, the majority of your mortgage payments go towards interest, not principle, so you are building up very little equity early on.  The bigger your downpayment the quicker you will get to 20% equity and be able to cancel this extra insurance.  If you think this sounds like a ripoff then you are right - I don't know how banks get away with charging you this insurance that covers their backs, but that is how it works.

Answer 3

Standard homeowners insurance insures your dwelling for its replacement cost, in case it is destroyed by fire, weather, or some other catastrophe not excluded from coverage. Destruction by floods, earthquakes, terrorist attacks, and pests such as termites are excluded from coverage. Homeowners insurance also offers some liability coverage, in case someone is injured on your property due to your negligence. Because lenders are using the home as collateral for the loan, the homeowner is required to carry insurance on the home. In some cases, lenders may require private mortgage insurance (PMI), which is insurance against the homeowner defaulting on the loan. Finally, there mortgage protection life insurance. This is a type of term life insurance that covers you for a certain number of years, often the same number of years as are remaining your mortgage. The death benefit coincides with the mortgage amount, so that the policy will pay off the balance of the mortgage should you die before the loan is paid off. If the mortgage balance is less than the death benefit, then the additional money will still be paid to the beneficiary. Typically, the policy has a guaranteed, or set, premium. A variation of mortgage protection life insurance is known as mortgage cancellation insurance. It also is a term life insurance policy payable upon the death of the borrower, however, instead of paying a set benefit, it covers the declining balance of a home loan.

Answer 4

Technically, yes.

A homeowners policy is the cheapest, most effecient way to get your house insured in a way which will keep the mortgage company happy.  It's for owner occupied homes, however, and not all buildings with mortgages are owner occupied, or even homes.

So "mortgage insurance" is fire insurance, and sometimes other types, on a building, not necessarily a home, that you have a mortgage on.

It can ALSO be, life insurance that pays off the mortgage if you die, disability insurance that makes your payments if you get disabled, or "private mortgage insurance" if you have a loan with less than 20% equity in your house.