A homeowners insurance policy also differs from mortgage insurance. Mortgage insurance is typically required by the bank or mortgage company for homebuyers making a down payment of less than 20% of the cost of the property. The Federal Home Administration also requires it of those taking out an FHA loan.
It’s an extra fee that can be figured into the regular mortgage payments, or be a lump sum charged when the mortgage is issued.
Mortgage insurance covers the lender for taking on the extra risk of a home buyer who doesn’t meet the usual mortgage requirements. If the buyer should default on payments, the mortgage insurance would compensate. Basically, while both deal with residences, homeowners insurance protects the homeowner and mortgage insurance protects the mortgage lender.