Mortgage protection vs homeowners insurance

What each one covers

• Homeowners — damage to the structure, personal property, liability, and additional living costs after a covered loss
• Mortgage protection — a death benefit if the insured person dies during the term

Only one is required

Lenders require homeowners insurance and will enforce it, generally by buying force-placed coverage at your expense if yours lapses. That coverage is typically more expensive and protects the lender's interest rather than yours.

No lender requires mortgage protection. If a solicitation implies otherwise, that's a reason to be sceptical of the whole approach.

The gap this creates

A household with excellent homeowners insurance and no life coverage is fully protected against the house burning down and not at all protected against the earner who pays for it dying.

Statistically, the second event is the one more likely to force a family out of the home. That's the gap worth closing.

Things homeowners insurance doesn't do

• It doesn't pay your mortgage if you die
• It doesn't pay your mortgage if you're disabled or lose your job
• It generally excludes flood, and often earthquake, without separate coverage
• It doesn't cover normal maintenance or gradual deterioration

What a complete picture looks like

• Homeowners insurance — required, and worth reviewing for adequate rebuild cost
• Life insurance sized to the mortgage and the rest of the family's needs
• Disability coverage, since inability to work is a more common income interruption than death
• An emergency fund for short gaps that don't warrant a claim