When you purchase a home through a lender, the lender owns the home until you pay it off. The lender assumes that you will continue to make your payments. Mortgage insurance covers the mortgage loan amount in the event that you are unable to continue to pay your mortgage payment. It reimburses the lenders in the event of default. Mortgage default insurance does not cover anything else in regard to your home or mortgage. Good to know Life insurance, disability insurance, critical illness insurance and Mortgage Protection Insurance are good options for covering your family's ability to pay your mortgage.