Have you ever wondered what the difference is between mortgage insurance vs hazard insurance?
Mortgage Insurance
The purpose of mortgage insurance is to pay off your home loan if you die or default on it. Many mortgage lenders require you to purchase mortgage insurance, as it will protect them from losing their investment. It is more for the lender than the buyer, though it can help you avoid unnecessary stress if you can’t finish paying your mortgage for some reason.
Hazard Insurance
Hazard insurance is part of a typical homeowners’ insurance policy. Your mortgage lender may require you to have a hazard insurance policy before approving the loan. It usually covers the structure and contents of your home in the case of fire, vandalism, fallen trees, or damage caused by storms or lightning. Flood damage is typically not included in hazard insurance.
Occasionally, hazard insurance is a requirement for purchasing mortgage insurance.
Hazard Insurance vs Mortgage Insurance
If you are buying a home, you will likely have to purchase both hazard and mortgage insurance. Hazard insurance is a must-have in case of damage, and mortgage insurance will protect you and your lender financially if you aren’t able to pay your mortgage.