PMI will reimburse the mortgage lender if you default on your loan and your house isn't worth enough to repay the debt in full through a foreclosure sale. PMI has nothing to do with job loss, disability, or death, and it won't pay your mortgage if one of these things happens to you.

How does PMI insurance work in foreclosure?

PMI covers roughly 20 percent of the purchase price of a home in case of borrower default. When a mortgage borrower's loan is foreclosed, the lender makes a claim against the PMI policy the lender made the borrower purchase.

What does PMI insurance pay for?

What is private mortgage insurance (PMI) Private mortgage insurance (PMI) is a type of insurance that may be required by your mortgage lender if your down payment is less than 20 percent of your home's purchase price. PMI protects the lender against losses if you default on your mortgage.