Mortgage insurance and homeowners insurance are two different policies that protect two different things. Mortgage insurance protects the lender if you stop paying the loan. It is required on many loans, such as conventional loans above 80 percent loan-to-value and FHA loans (CFPB). Homeowners insurance, sometimes called hazard insurance, protects the house and your belongings against losses like fire, wind and hail, and protects you against certain liability. Every mortgage requires homeowners insurance. Only some require mortgage insurance.
On the Loan Estimate, mortgage insurance shows in the projected payments and, for FHA, as an upfront premium in the loan costs. Homeowners insurance shows as a prepaid premium and, if escrowed, in the initial escrow deposit and the monthly escrow amount (12 CFR 1026.37). A worksheet that just says "insurance" may mean either one, or both. Read the line labels.
On loans sold to Fannie Mae, the policy must cover required perils such as fire, windstorm and hail, provide replacement cost coverage except for roofs, and keep each deductible for a required peril at or below 5 percent of the coverage amount (Fannie Mae B7-3-02). Flood is separate, and required in high-risk flood zones (42 U.S.C. 4012a). See homeowners insurance in Texas.
Fictional example: a buyer asks which insurance can be dropped to lower the payment. The homeowners policy stays for the life of the loan. The conventional PMI on the loan can be cancelled once the balance reaches the federal or investor threshold. The buyer chooses to shop homeowners insurance for a better premium with acceptable deductibles and plans to request PMI removal when eligible.
If you want to see each insurance line in your payment before you choose a loan type, I can lay it out with your numbers. Book a call, or start an application.
Links checked Oct 21, 2026.
About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.
Equal Housing Opportunity.
Last reviewed: Oct 2026