There are two kinds of mortgage insurance you may hear about during your house hunt: mortgage payment insurance and mortgage life insurance. Don't confuse these with private mortgage insurance, or PMI, which insures lenders in cases where a buyer puts down only a small percentage of the mortgage cost.

Mortgage payment insurance covers monthly mortgage payments if the homeowner is forced out of her house because of a disaster, such as a fire. There is really no need for this type of insurance. Your homeowner's policy should cover the cost of any rebuilding necessary, and often, if you must live elsewhere during that time, that expense is covered, too. So you are unlikely to have significant additional expenses that aren't already covered, and you were already expecting to make those mortgage payments, so insurance that covers these is an unnecessary expense.

Mortgage life insurance provides funds to pay off a mortgage if the principal wage earner dies before the loan is repaid. However, if you are at all concerned about such a possibility, look into purchasing term life insurance instead. Mortgage insurance is more costly, and the money from that insurance must be used to pay off your loan, whereas the proceeds from term life insurance can be used for any purpose you choose.