Homeowners insurance and title insurance are two totally different types of insurance coverage that protect homeowners against different risks.
Homeowners insurance covers loss or damage to your home, other structures on your property, personal property kept in your home, and medical expenses for accidents that occur on your property.
Title insurance, on the other hand, protects your ownership in the real property. Title insurance guarantees that you have true entitlement to the property. Many lenders will require you to carry title insurance so they know for sure that you have clear ownership of the property and the home.
A title insurance company will conduct research before a loan is approved and they search for any outstanding liens, encumbrances or other defects that may hinder the property ownership from becoming solely yours. Once the Title Insurance Company is sure that that property does not hold any such liens, the Title Insurance Company will issue title insurance. This protects the owner from anyone who tries to claim ownership of the property.
Homeowners insurance is a form of property insurance that covers losses and damages to an individual's house and assets in the home. The policy usually covers interior damage, exterior damage, loss or damage of personal assets, and injury that arises while on the property.
Homeowners insurance can also provide coverage for any personal items and belongings inside your home or any natural disaster that might damage your property. With homeowners insurance, you can add additional coverage such as earthquake or flood insurance. However, each state is different in how they handle natural disasters and what is included in their homeowners policies.
Title insurance is a type of insurance that protects your ownership in the home or property. Title insurance is essentially a guarantee that you are the owner and have the true entitlement to your property. Title insurance also takes into account all of the previous owners, transfer and uses.
A title search needs to be performed to legally transfer any real estate property and helps determine if the property is free and clear of any encumbrances or defects. Title insurance is obtained at closing and will also protect you if prior taxes are still due and will insure that the deed to your property is recorded correctly.
Once the title company is sure the property does not hold any of these types of liens, the title company will issue title insurance.
· A Lender’s Policy, which is also called a loan policy, protects the lender against any title claims or defects.
· An Owner’s Policy will protect the owner and cover the full value of the property.
The difference between homeowners insurance and title insurance is that homeowners insurance protects the actual home and anything around or inside it.
Title insurance, on the other hand, is needed for the assurance that the property you just purchased is free of any debt, encumbrances and that you are and will be the owner for the future. In addition to this, title insurance is paid once whereas homeowners insurance is paid annually.
The similarities between homeowners and title insurance are that some lenders will require both types of insurance and that they both offer protection. Homeowners insurance protects you so you have the resources to pay for any damage that might occur to your property.
Title insurance protects you from anyone else claiming your home is theirs or for some prior owner’s back taxes or encumbrances or any other real property dispute.
So now we come to the final question: title insurance vs homeowners insurance. Do you need both?
Yes, you do. Having title insurance and homeowners insurance is not only a good idea for your financial and personal future; it may be a requirement as part of the homeownership process.
When it comes to title insurance, you generally won’t have a choice whether you want it or not. Title insurance is a requirement as part of the homeownership process; the mortgage lender will require it as part of the deal in order to protect their investment and yours.
As far as homeowners insurance goes, getting it is just a very good idea for your safety and security for the future. You do not ever want to think that the worst could happen in your life.
But, it is always best to be prepared for the worst. That is what homeowner’s insurance gives you. The assurance that you get the financial protection you need in case the worst happens.
Assistant Manager, Real EstateTreadstone Associates