Question:

What does mortgage insurance cover in general?

Answer:

What mortgage insurance covers when you close a loan depends on the policy you are buying. Odds are high that you will be offered or required to pay mortgage insurance with your loan.

Different Types of Mortgage Insurance Coverage

PMI - mortgage insurance that covers up to 20% of the house value to the lender - will be required if you borrow more than 80% of a house worth.

Also, you will be offered mortgage life insurance to guarantee your payments if you suffer loss in case of sickness and unemployment, or death. The cover will be different with different lenders. Also, a mortgage life insurance may allow coverage for people with different conditions who couldn't really qualify for a regular life insurance. However, people with conditions will have to pay higher premiums.

Mortgage insurance allows purchasing a house with little or no down payment and some lenders will combine a PMI with a mortgage life insurance for the borrowers' convenience. In that case, the mortgage insurance company will keep making the mortgage payments for limited time - usually, up to a year. More exhaustive mortgage insurance policies may include complete repayment of the mortgage, but will be more expensive.

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