What type of insurance covers the lender against losses due to a default on a home loan?

Mortgage insurance is specifically designed to protect the lender from losses that may arise if a borrower defaults on their home loan. When a borrower makes a down payment that is less than 20% of the home's purchase price, lenders often require mortgage insurance as a condition of the loan. This insurance provides a safety net for the lender, ensuring that they can recover some of their losses in the event that the borrower fails to make their mortgage payments.

Homeowners insurance, on the other hand, protects the homeowner against losses related to damage to the property and personal liability but does not cover the lender's interests in case of default. Disability insurance provides income in the event of a disability, while life insurance offers a death benefit to beneficiaries but does not relate to the repayment of home loans. Thus, mortgage insurance is the correct choice for covering lenders against default losses on home loans.