What is the difference between mortgage insurance and home insurance?

As its name indicates, insurance was created as a measure of protection for individuals or companies against the consequences of possible risks and eventualities in life. They are based on granting these risks to an entity called “insurer”, which is in charge of paying the insured an indemnity as long as the “risk” is stipulated in the contract agreed between the insurer and the insured. In the contract between both parties, the insured must pay a monthly premium that will be returned by the insurer in the event of the occurrence of an event foreseen in the contract.

There are several types of insurance policies, all of which are designed to protect the client from various situations. You can insure almost anything, they are classified into personal insurance (life, health, accidents), damage or property insurance (automobile, theft, civil liability, etc.), and service provision insurance (travel, death, legal defense).

Mortgage insurance

These are the insurance policies associated with mortgage loans and they reduce the risk to the lender; they are contracted collectively to protect the guarantees of the lending entities (banks, cooperatives, family compensation funds, etc.). On the other hand, mortgage insurance allows borrowers lower down payments and is sometimes necessary to qualify for loans granted by the government.

Homeowner’s insurance

It is a contract purchased between homeowners and insurers (in some cases commercial premises) to protect their homes from various damages, either from fires, explosions, lightning, electrical, locksmith and plumbing breakdowns, domestic accidents, damages caused by storms such as floods, robberies, thefts, among others, with a previous valuation of the property. It also covers the owner for damages caused to third parties such as damages and injuries caused by falling objects from windows and balconies from the insured property.

Differences

The key difference between these two insurances is who it is aimed at, who it protects. Homeowner’s insurance primarily protects the borrower’s property from devastating financial damage, while mortgage insurance protects the lender if the contract and payment plans are breached by the borrower.

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