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Homeowners Insurance vs. Mortgage Insurance



Both homeowner's insurance and mortgage insurance can add to the cost of owning a property, and you may encounter both during the mortgage process. However, their similarity ends there. The basic difference is this: Homeowner's insurance protects your home and its contents, while mortgage insurance (also known as private mortgage insurance or PMI for short) protects your mortgage lender in case you can't meet your mortgage payments.


Homeowners Insurance vs. Mortgage Insurance


Although homeowner's insurance and mortgage insurance sound similar, they are actually very different. Here is a brief description of each.


What is Homeowners Insurance?


Homeowners insurance is a form of property insurance designed to protect your home and its contents from damage caused by unforeseen events. Additionally, most homeowner's insurance protects you from lawsuits if someone is injured on your property. It insures your home and property against expenses related to damage or loss. This insurance is ideal for someone who wants to protect their home and belongings.


A homeowner's insurance policy may cover you for:


House layout

own possessions

You, your family members, and pets are liable in lawsuits for injuries they cause to others

Medical expenses if someone is injured in your home

Additional living expenses when your home is unlivable


What is mortgage insurance?


Mortgage insurance, or private mortgage insurance (PMI), is very different. It's an insurance policy designed to protect a lender—a bank, for example—if you can't meet your mortgage payments.


With PMI, the homeowner typically pays a percentage of their total mortgage cost each year. Then, if they can't make the mortgage payments, the insurance company will pay the lender on their behalf. Adding BMI to your monthly bills can increase the cost of owning a home

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