First, it is important to understand that there are different types of mortgage insurance; some of them can prevent foreclosures, others cannot. The different types include Private Mortgage Insurance, Lender Paid Mortgage Insurance, Mortgage Disability Ins., and Mortgage Life Ins.

Mortgage disability ins. can prevent foreclosures when homeowners become disabled. According to the web site of State Farm Insurance, their policy of this type will make the monthly payments (for as long as three years) if this happens to the homeowner. The length varies with different insurers.

Another option, mortgage life insurance, pays off the loan if the homeowner passes away. Wikipedia.org indicates that some policies of this type will also pay if the homeowner is found to have an illness which will cause his or her death within the next year.

A variation on this type of life ins. is VLMI, or Veteran’s Mortgage Life Insurance. The VA.gov web site states that it is only available to disabled veterans who have obtained a Specially Adapted Housing Grant; this type of insurance repays the loan if the disabled veteran homeowner dies.

However, there are other types of ins. which are for the protection of the lending institution, and do not prevent foreclosures. According to HUD.gov, private mortg. insurance (PMI) is paid for by the borrower, and is most commonly needed for mortgages with relatively small down+payments (because the lender faces greater risk in this situation).

Lender paid mortgage ins. (LPMI) is similar, but is paid for by the bank or other lending institution. HUD.gov indicates that the interest rate on mortgages with LPMI is made higher so that the lender can pay for it. As with PMI, LPMI does not prevent foreclosures or protect the homeowner from losing his or her home, but helps prevent the lender from losing money if they have to foreclose upon the home.

A number of factors should be taken into consideration before any optional (life, disability) ins. on mortgages is purchased. These include the number of income earners and their ages, how many years it will take for the loan to be paid off normally, and the effect of saving an amount of money equivalent to the premiums.

Overall, some types of mortgage insurance can indeed prevent foreclosures, but only in particular situations. Homeowners and potential buyers should research and fully understand any type of insurance prior to making the decision to buy it.