Quick answer
Mortgage insurance protects your lender if you stop making payments. Homeowners insurance protects you and the house from damage, theft and liability. You pay for both, but they cover different people.
Every lender requires homeowners insurance for as long as you have the loan. Mortgage insurance applies only to some loans: conventional loans with less than 20% down, and FHA and USDA loans. On most conventional loans it can be removed later. Many buyers pay both through the monthly escrow payment.
Rules on this page were verified in . Mortgage insurance terms are subject to HUD, VA, USDA, Fannie Mae, Freddie Mac and lender guidelines and may change.
At a glance: two different policies
- Mortgage insurance: protects the lender if you default
- Homeowners insurance: protects you, the home and your belongings
- Who pays mortgage insurance: conventional below 20% down, FHA and USDA; VA has a funding fee instead
- Who needs homeowners insurance: every borrower, for the life of the loan
- Ending it: PMI can come off; homeowners coverage stays
- How you pay: often both through escrow, with your monthly payment
What is the difference between mortgage insurance and homeowners insurance?
| Mortgage insurance | Homeowners insurance | |
|---|---|---|
| Protects | The lender, if you default and a foreclosure doesn’t cover the balance | You and the home: damage, theft and liability |
| Required when | Conventional loans with less than 20% down; FHA and USDA loans | Every mortgage, for the life of the loan |
| Who chooses it | The lender arranges it as part of the loan | You choose your own insurance company or agent |
| How you pay | Monthly with your payment, and an upfront fee on FHA and USDA | Annual premium, often paid from escrow |
| When it ends | Conventional PMI can be canceled; FHA and USDA often last for the life of the loan | Never required to end; worth keeping after payoff |
Sources: CFPB, What is mortgage insurance; CFPB, Why is homeowner’s insurance required.
What does homeowners insurance cover?
A standard homeowners policy bundles several coverages:
- Dwelling: repairing or rebuilding the house after a covered loss such as fire, wind, hail or a fallen tree.
- Other structures: a detached garage, shed or fence.
- Personal property: furniture, clothing and electronics if they’re damaged or stolen.
- Loss of use: hotel or rental costs while the home is being repaired.
- Liability and medical payments: if a guest is hurt on your property.
What it usually leaves out: floods and earthquakes. Flood insurance is a separate policy, and your lender requires it if the home is in a FEMA Special Flood Hazard Area; see FloodSmart. In West Tennessee, near the New Madrid fault, ask your agent about an earthquake endorsement. Your lender needs proof of coverage before closing and is listed on the policy as the mortgagee.
How does mortgage insurance work on each type of loan?
| Loan | What it’s called | Upfront | Ongoing | When it ends |
|---|---|---|---|---|
| Conventional | Private mortgage insurance (PMI) | Usually none | Monthly; varies with credit score and down payment | Request removal at 80% of original value; ends automatically at 78% |
| FHA | Mortgage insurance premium (MIP) | 1.75% of the base loan | Annual premium, 0.55% on most 30-year loans with less than 5% down | Life of the loan with less than 10% down; 11 years with 10% or more |
| USDA | Guarantee fee | 1% of the loan | 0.35% annual fee | Life of the loan |
| VA | Funding fee (no mortgage insurance) | 2.15% on first use with less than 5% down; waived for many disabled veterans | None | No monthly charge |
Program terms and eligibility are subject to HUD, USDA, VA, Fannie Mae, Freddie Mac and lender guidelines and may change. FHA premiums: HUD Handbook 4000.1 and Mortgagee Letter 2023-05. VA: VA funding fee.
On an illustrative $350,000 Robertson County purchase:
| Loan | Down payment | Upfront fee | Loan amount with fee |
|---|---|---|---|
| FHA, 3.5% down | $12,250 | $5,911 (1.75% of $337,750) | $343,661 |
| USDA, 0% down | $0 | $3,500 (1%) | $353,500 |
| VA, 0% down, first use | $0 | $7,525 (2.15%), unless exempt | $357,525 |
| Conventional, 5% down | $17,500 | None; monthly PMI instead | $332,500 |
Illustrative example only. Actual interest rates and APRs vary based on loan program, borrower qualifications, property, market conditions and other factors. Homeowners insurance premiums are set by your insurer and are separate from these fees.
Do you pay both, and how?
If you put less than 20% down on a conventional loan, or use an FHA or USDA loan, you will usually pay both. Mortgage insurance is part of your monthly mortgage payment. Homeowners insurance is a separate policy, but most lenders collect for it monthly into an escrow account, along with property taxes, and pay the bill when it’s due. For how escrow works, see is homeowners insurance included in your mortgage payment?
How do you get rid of mortgage insurance?
- Conventional PMI: under the Homeowners Protection Act, you can ask to cancel it once your balance is scheduled to reach 80% of the home’s original value, and it ends automatically at 78% if you’re current. Extra principal payments get you there sooner. Some servicers will consider a new appraisal if the value has risen.
- FHA MIP: if it’s for the life of the loan, the usual way out is a refinance into a conventional loan once you have enough equity.
- USDA: the annual fee lasts for the life of the loan unless you refinance.
Homeowners insurance doesn’t go away. Your lender requires it until the loan is paid off.
Mortgage insurance vs. homeowners insurance FAQ
Is mortgage insurance the same as mortgage protection insurance?
No. Mortgage insurance protects the lender and is required on some loans. Mortgage protection insurance is optional life or disability coverage, sold separately, that pays your mortgage if you die or can’t work. Compare it with ordinary term life insurance before you buy it.
Can I avoid mortgage insurance with less than 20% down?
Sometimes. VA loans have no monthly mortgage insurance. Some lenders offer lender-paid mortgage insurance in exchange for a different rate. Program terms are subject to agency and lender guidelines and may change. Compare total costs over the years you plan to keep the loan before choosing.
Does mortgage insurance pay my mortgage if I lose my job?
No. Mortgage insurance pays the lender part of its loss after a default; it doesn’t make your payments. If you’re struggling to pay, call your servicer early or find a HUD-approved housing counselor through the CFPB’s counselor finder.
Can I choose my own homeowners insurance company?
Yes. You pick the insurer or agent and the coverage, as long as it meets your lender’s requirements. Your lender needs the declarations page before closing and must be named as mortgagee. Shop a few quotes early, since premiums vary widely by company and location.
Is mortgage insurance tax-deductible?
Possibly, starting with the 2026 tax year. The federal deduction lapsed after 2021, and the 2025 tax law restored it as deductible mortgage interest for borrowers who itemize, with limits. Homeowners insurance on your main home isn’t deductible. Check IRS Publication 936 or a tax advisor for your situation.
Where these figures come from
| Figure or rule | Source | As of |
|---|---|---|
| What mortgage insurance is and who it protects | CFPB, Ask CFPB | Retrieved Oct 26, 2026 |
| Why lenders require homeowners insurance | CFPB, Ask CFPB | Retrieved Oct 26, 2026 |
| PMI cancellation at 80% and 78% | CFPB, Homeowners Protection Act | Retrieved Oct 26, 2026 |
| FHA 1.75% upfront and annual MIP | HUD Handbook 4000.1; Mortgagee Letter 2023-05 | Annual rates effective Mar 20, 2023 |
| VA funding fee | VA, Funding fee and closing costs | Rates effective Apr 7, 2023 |
| USDA 1% guarantee fee and 0.35% annual fee | USDA Rural Development, HB-1-3555 | Fiscal year 2026 |
| Flood insurance requirement | FEMA, FloodSmart (NFIP) | Retrieved Oct 26, 2026 |
| Origins of private mortgage insurance | MGIC, About | Retrieved Oct 26, 2026 |
Related guides
- Is homeowners insurance included in your mortgage payment?
- How much down payment do you need for a house?
- Closing costs vs. down payment.
- USDA loan vs. VA loan.
- Robertson County mortgage guide.
- About Christopher Armantrout, the licensed originator who wrote this page.
Want to see the mortgage insurance on each loan you qualify for? Talk to Valor Mortgage.
I’ll lay out the conventional, FHA, USDA and VA options side by side, with the upfront fees, the mortgage insurance and when it ends on each, so you can pick the one that fits how long you plan to stay.
Call me at (615) 671-9178. That’s the fastest way to get a straight answer on what you’d qualify for and how mortgage insurance would work on each loan you qualify for.
If it’s after hours, grab a time on my calendar. Pick a slot that works and I’ll call you then.
If your life is too chaotic for a phone call right now — I understand — start an application and I’ll review it and reach out with a plan.
Valor Mortgage, LLC · Christopher Armantrout, Mortgage Loan Originator, NMLS #1210804 · Valor Mortgage, LLC is powered by Encore Lending Group, LLC, NMLS #1249911 · Licensed in Tennessee · Equal Housing Opportunity
724 S Main St, Springfield, TN 37172 · (615) 671-9178 · christopher@valor.mortgage · NMLS Consumer Access
The dollar figures on this page are illustrative examples for general information only and are not an offer, a rate quote, or a commitment to lend. Actual interest rates and APRs vary based on loan program, borrower qualifications, property, market conditions and other factors. Program fees, limits and terms are set by the agencies named above and change without notice; all loans are subject to credit approval, income verification and property appraisal. Not all applicants will qualify.