Mortgage Insurance Meaning Fha Loan Amortization An FHA loan is a government-insured loan subject to certain qualifications and restrictions. FHA provides mortgage insurance on loans made by approved lenders. The cost of mortgage insurance is paid by the homeowner as an up-front amount that is usually financed into the loan amount, as well as an additional amount that is included in the. · Unlike the better-known mortgage insurance, which protects lenders if homeowners default, mortgage protection insurance is, essentially, a type of life insurance. It covers your mortgage debt if you die or become disabled. Banks generally try to sell homeowners this type of insurance when they sign up for a new mortgage.