Homeowners Insurance vs. Mortgage Insurance: What's the Difference?

Two Policies, One Property:

Homeowners Insurance vs. Mortgage Insurance 

Our ServiSolutions staff members frequently hear from confused customers about homeowners insurance and mortgage insurance. These two types of coverage sound similar, but form separate parts of your mortgage payment. Understanding these differences helps you budget effectively and avoid confusion about what you’re paying.

In a nutshell: Homeowners insurance protects your property and personal assets, while mortgage insurance protects your mortgage servicer if you default on your loan.

The Basics

• Protection: Homeowners insurance protects you; mortgage insurance protects the mortgage servicer.

• Coverage: Homeowners insurance covers property damage and liability; mortgage insurance covers the mortgage servicer’s risk in case of default.

• Requirement: Homeowners insurance is always required by lenders and mortgage servicers. Mortgage insurance varies based on your equity, credit score, and loan type.

• Duration: Homeowners insurance is ongoing; mortgage insurance is often a temporary requirement.

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  Homeowners Insurance
  
  Homeowners insurance is required, but the specifics are chosen by you. It pays for losses and damage to your property if something unexpected happens, like a fire or burglary. It may also cover the contents of your home and provide personal liability coverage if an accident or injury happens on your property. The cost of your homeowners insurance is affected by several factors like the location, value and condition of your home; how many claims you’ve made in the past; how much it would cost to rebuild; and the coverage and deductibles that you choose.

  
  Mortgage Insurance
  
  Mortgage insurance is arranged by your lender and provided by private insurance companies (for conventional loans) or by government agencies (for FHA, USDA, and VA loans). Rates vary by lender, down payment amount, and credit score. Your lender shows you the options on your Loan Estimate and Closing Disclosure when you buy your home.
  
  Escrow to the Rescue
  
  Homeowners insurance and mortgage insurance have one thing in common: Both are paid through the escrow account that ServiSolutions maintains for you. ServiSolutions does not set insurance rates, keep your homeowners or mortgage insurance payments, or profit from them. We simply collect your payments through your escrow account and pass that money on to the insurance providers on your behalf.
  
  For more information, please visit us at www.servsol.com/homeowners or send an email to [email protected].
  
  More resources:
  

  • What is mortgage insurance and how does it work? | Consumer Financial Protection Bureau

  • Mortgage Insurance vs. Homeowners Insurance: What To Know | Chase

  • Homeowners Insurance vs. Mortgage Insurance | Insurify