+120 more)
)
)
)
)
)
Licensed auto and home insurance agent
4+ years of experience in insurance and personal finance editing
NPN: 20564519
Updated
Homebuyers may think homeowners insurance and mortgage insurance are the same type of policies, but they serve different purposes. Homeowners insurance protects the home and homeowner, while mortgage insurance protects the lender if the borrower defaults on the loan.
Most homeowners need homeowners insurance due to lender requirements, but mortgage insurance is only required in certain situations.
We’ll take a closer look at what each type of insurance covers, costs, requirements, and when you might need both homeowners and mortgage insurance.
Homeowners and mortgage insurance are two separate types of insurance. The table below shows how key features compare, who the insurance protects, what it covers, and common lender requirements.
Feature | Homeowners Insurance | Mortgage Insurance |
|---|---|---|
| Who it protects | You (the homeowner) | Your lender |
| What it covers | Property damage, liability, belongings | Protects the lender if you default |
| Required by the lender | Yes | Only with a low down payment |
| Covers home repairs | Yes | No |
| Covers injuries | Yes | No |
| Can be canceled | Only if you sell or cancel the policy | Yes (PMI) or limited (FHA) |
It’s common for buyers to need both homeowners insurance and mortgage insurance, especially first-time homebuyers. All mortgages generally require homeowners insurance coverage, and mortgage insurance doesn’t replace it.[1] But mortgage insurance requirements depend on the size of your down payment, the type of mortgage, and other lender-specific policies.
For example, buyers who put down 20% or more when buying a house usually only need to carry homeowners insurance. But first-time buyers who make only a small down payment must have both types of policies.
Compare partners with top insurers for real-time quotes.
With conventional loans, mortgage insurance is automatically canceled once the loan balance reaches a certain amount — typically 78% of your home’s original value, or when the loan term is half over. But this isn’t always the case.
Mortgage insurance removal may be possible earlier by request, when the mortgage balance falls to 80%. Federal Housing Administration (FHA) loans, on the other hand, require Mortgage Insurance Premium (MIP) for the life of the loan, unless you refinance.[2]
)
Who it protects: You
What it covers: Your home, belongings, and liability
How much it costs: $2,808 per year for a policy with $300,000 of dwelling coverage
A home insurance policy protects you and your property against damage from sudden, accidental events, such as windstorms. When you file a claim, your insurance company sends the payout to you (or a contractor) after you pay your deductible — not the lender.
Most mortgage lenders require you to have a policy in place before closing, and coverage must remain in effect for the life of the mortgage.
Most homeowners insurance covers the following:[3]
Dwelling (structure): This coverage pays the cost to repair or rebuild your home after a covered loss. It may also cover other structures on your property that aren’t attached to your home, like fences and sheds.
Personal property: The personal belongings in your home, including clothing, furniture, toys, and electronics, are protected under personal property coverage. And you can buy extra coverage if you have many high-value items, like jewelry.
Liability: Liability insurance covers you and members of your household against accidental injuries and damage to other people on your property or theirs. It also helps pay for legal fees and settlement costs if you’re sued.
Additional living expenses: This coverage pays for temporary living costs, such as a hotel stay, if a covered disaster, like a hurricane, makes your home uninhabitable during repairs.
Homeowners insurance isn’t legally required. But if you finance your home with a home loan, your lender will likely require you to buy homeowners insurance to secure the loan.[4] If you don’t buy a policy or let your homeowners insurance lapse, your lender may buy a policy for you and charge you for it. Rates are usually higher than a standard policy you buy on your own.
While not required after your mortgage is paid off, most homeowners continue to carry homeowners insurance to protect their investment.
Who it protects: The lender
What it covers: The lender’s losses if you default on the loan
How much it costs: Depends on your credit score and down payment, but typically ranges from $30 to $70 per $100,000 borrowed per month
Mortgage insurance, also known as private mortgage insurance (PMI), is coverage that protects the lender, not the homeowner. It doesn’t cover property damage, injuries, or repairs.
Instead, it provides financial protection to your lender if you can’t make your mortgage payments and default on the loan. For example, after a foreclosure sale, PMI may reimburse your lender for the remaining balance on your mortgage if the sale doesn’t fully cover the amount.[5]
See multiple quotes and buy a policy in minutes.
Private mortgage insurance may be required in certain situations, depending on the type of mortgage you have and the down payment amount.
Here’s a closer look at several types of loans and private mortgage insurance requirements:
Conventional loans: PMI is required for conventional mortgages when your down payment is under 20% of the loan amount.
FHA loans: Mortgages backed by the FHA require MIP, regardless of down payment. The loan includes an up-front fee (part of your closing costs) and a monthly payment. You can roll the up-front cost into your premium, but your loan amount and overall cost will increase.
USDA loans: Loans backed by the U.S. Department of Agriculture (USDA) operate similarly to FHA loans but are typically cheaper and have zero down payments. These loans are designed for borrowers in rural areas with low and moderate incomes.[6]
VA loans: The Department of Veterans Affairs (VA) offers loans with an up-front fee and no monthly payments. The fee amount also varies depending on your military service, down payment, disability status, whether you’re buying or refinancing, or whether it’s your first VA loan or you’ve had a VA loan before.
During the homebuying process, your lender can help you understand what’s required for your specific loan, including mortgage insurance premiums and closing costs.
These answers to commonly asked questions can help you better understand how homeowners insurance and mortgage insurance work.
No. Mortgage insurance protects the lender if you fail to make payments. Homeowners insurance protects you financially if a sudden or accidental loss damages your home or belongings. It also provides liability coverage.
No. You can’t use mortgage insurance to cover home repairs. Instead, it protects the lender if you fall behind on your mortgage and a foreclosure sale doesn’t cover the remaining balance.
In general, most mortgage insurance is automatically canceled once the principal balance on your loan reaches 78% of your home’s original value or you hit the halfway point of the loan term.
Lenders require homeowners insurance policies to protect the property against loss or damage from fire, vandalism, or other risks. If you don’t have your own coverage, your lender may purchase home insurance on your behalf and charge you for it.
Homeowners insurance isn’t included in your mortgage, but your monthly payment most likely includes the principal plus the homeowners insurance premium, which goes into an escrow account. Then, the lender uses the funds to pay your homeowners insurance bill on your behalf.
No, renters don’t need mortgage insurance. Mortgage insurance is only required by lenders if you take out a mortgage to buy a home and your down payment is less than 20%.
Compare.com data scientists analyzed rates from more than 180 home insurance companies sourced directly from Compare.com’s partner companies and Quadrant Information Services. Rates span all 50 states and Washington, D.C., and quote averages represent the mean price for a given coverage level and geographic area. To ensure data reliability, only insurers meeting minimum quote thresholds were included in the analysis.
Unless otherwise specified, quoted rates reflect the average cost for homeowners with no prior claims and good credit with a home construction year of 1980. The default coverage assumptions include:
Additional data points beyond these default values are sourced from Compare.com’s proprietary database. Rates are updated monthly.
)
Licensed auto and home insurance agent
4+ years of experience in insurance and personal finance editing
NPN: 20564519
At Compare.com, it’s our mission to give you the tools to find the best (and most affordable) insurance for your unique needs and budget. We strive to provide information that’s helpful, clear, and unbiased, and we believe that comparing insurance companies should never put you at risk of spam. Our editorial team — which is made up of experienced writers, editors, insurance agents, and data analysts — has spent thousands of hours researching and creating the coverage overviews, side-by-side comparisons, and detailed reviews you see across our site.
While we make money through partnerships with some of the brands we discuss in our articles, our editorial team operates 100% independently, and these partners never influence or affect the topics, reviews, ratings, or recommendations we provide. We never guarantee favorable reviews or mentions in exchange for compensation from any brands or partners, and we uphold strict editorial standards to ensure our content is always independent, truthful, and unbiased.
