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What is the difference between homeowners insurance and mortgage insurance?

The primary difference is that mortgage insurance protects the lender if the homeowner defaults on the loan, while homeowners insurance protects the homeowner (and by extension the lender) against property damage and liability exposures.

What is mortgage insurance?

Mortgage insurance, which is also known as private mortgage insurance (PMI), covers home lenders if the borrower defaults on the loan. PMI can be required if the borrower cannot make a large enough down payment. The concern is that if the home is foreclosed, and the down payment was low, the lender may not be able sell the home for enough to pay off the loan. It is important to talk with your lender about how you can avoid PMI, as it is an additional expense that often is not necessary.

What is homeowners insurance?

Homeowners insurance, also known as home insurance, fire insurance, or hazard insurance, primarily protects the home, outbuildings, belongings, and loss of use, as well as personal liability exposures. Lenders will invariably require homeowners insurance, as it protects their investment.

What does homeowners insurance cover?

There are several coverages that can be offered under a homeowners insurance policy.  Below are some of the basic coverages included with most homeowners insurance policies.  In addition, many insurers offer optional coverages.  A more extensive list can be found by clicking here.

  • Dwelling: Covers the home and anything permanently attached to it. Coverage is based on a replacement cost valuation.
  • Separate Structures: Covers detached garages, accessory dwelling units, sheds, and fences.
  • Personal Property: Covers your belongings, including furniture, electronics, clothing, kitchenware, etc.
  • Loss of Use: Covers additional living expenses (primarily a hotel, apartment, or rental home) if your home is rendered uninhabitable by a covered loss.
  • Liability: Protects the insured financially if held responsible for most injuries or property damage outside of a motor vehicle. Examples are injuries caused by a trip/slip on the property, dog bites, or while playing sports.

How much does homeowners insurance cost?

The cost of a homeowners policy depends on several factors such as reconstruction cost, location, coverage, deductible, credit, and the home’s age. For an accurate premium, it’s best to request a quote from a licensed agent.

What if my home is a rental?

A rental home is essentially a business, and is covered differently than a primary residence. For example, a homeowners policy generally does not offer coverage if a renter is injured and holds the landlord responsible. Also, while a homeowners policy covers a place to live while a home is being rebuilt, it would not cover lost rental income. What is needed is a landlord insurance policy, which includes coverage specially designed for rentals.

Contact Chris Elliott Insurance Agency!

We offer many unique coverages such as guaranteed replacement cost, personal injury, plumbing, slow leaks, equipment breakdown, septic/sump backflow, identity theft, sewer line, and roof/siding matching. Our agency specializes in home insurance–often writing more than any other Farmers agency in Washington State–and Farmers is known for offering some of the most competitive rates in the industry.