A home insurance can help you out if you decide to get a lone using your house as collateral. A mortgage is a form of a loan where you borrow money from a bank with your house sort of like a safety net. If you are not able to pay them back, they can seize your house and have full control of it. A home insurance policy on a mortgaged home assures the bank that it can still collect on the debt in the event that the mortgaged house is destroyed or any untoward events may happen to decrease its market value.