 TITLE: What Does Homeowners Insurance Cover? CONTENT: What's the Difference Between Homeowners Insurance and Mortgage Insurance?\n--------------------------------------------------------------------------\nThe names may sound similar, but homeowners insurance and mortgage insurance are very different types of financial products. The short version: Homeowners insurance protects you and your property, while mortgage insurance protects your lender if you can't make your loan payments.\nIf you take out a conventional mortgage and make a down payment of less than 20%, the lender considers the loan riskier because you have minimal equity in the home. In this case, the lender will require you to purchase mortgage insurance. If you default on the loan, the insurer pays the lender.\nOn a conventional loan, once you reach 20% equity in the home, you can usually cancel your mortgage insurance. If you take out a government-backed FHA loan, you have to pay mortgage insurance for the life of the loan if you make a down payment under 10%.\nHomeowners insurance, on the other hand, isn't related to your mortgage. It's a way of reducing your (and your lender's) financial risk in case your home or belongings inside it are damaged or stolen. You pay for coverage, and if a covered incident occurs, you can file a claim and the insurer will cover the cost. END