Homeowner Insurance Vs Mortgage Insurance – Homeowner’s and mortgage insurance can add to the cost of owning a home, and you’re likely to hear about both during the mortgage process. But that’s the only thing they have in common.
The main difference is that homeowners insurance protects your home and its belongings, while mortgage insurance (also called private mortgage insurance, or PMI for short) protects your mortgage lender in case you can’t make your mortgage payments.
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Insurance for homeowners vs insurance for the mortgage
Even though homeowners insurance and mortgage insurance sound the same, they are very different. Here’s a summary of each.
What is insurance for a home?
Homeowners insurance is a type of property insurance that protects your home and the things in it from damage caused by things you can’t control. Also, if someone gets hurt on your property, most homeowners insurance protects you from being sued. It also protects your home and property from the costs of damage or loss. This is the best insurance for someone who wants to protect their home and things.
Your homeowner’s insurance may cover the following things:
- How a home is built
- Personal belongings
- Liability for injuries you, your family, or your pets cause to other people in a lawsuit
- Expenses for medical care if someone gets hurt in your house
- Extra living costs while your house is out of commission
But there are limits. Standard homeowners insurance policies usually don’t cover damage caused by floods, mould, earthquakes, landslides, and backed-up or overflowing sewers or drains.
What is insurance for a mortgage?
Private mortgage insurance (PMI) is very different from mortgage insurance. This insurance policy protects the lender, like a bank, in case you can’t pay your mortgage.
With PMI, the homeowner usually pays a portion of the total cost of their mortgage every year. Then, if they can’t pay their mortgage, the insurance company will pay the lender for them. Adding PMI to your monthly payments can make owning a house more expensive.
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