Title insurance is not a substitution for home insurance and vice versa. Here's the difference. Hint: you're likely to need both.
 

Homeowner’s Insurance

Simply put, homeowners insurance covers any loss or damage to your home. This includes anything from your home being robbed of your personal property to a vehicle driving into the side of your home. Homeowners insurance protects your home, any structures on your property, and any personal property kept in your home. Liability and medical expenses for any accidents occurring on your property are also covered under your homeowner’s insurance policy. Homeowners insurance may also cover “loss of use” which means if you are unable to live in your home due to any damage caused your policy may cover expenses that occur while you live elsewhere such as a hotel. 

When purchasing homeowners insurance it is important to understand the limits of your policy as all insurance policies are not created equal. Depending on your policy you may be covered in the case of a fire or storm but not covered in the case of a burglary or vice versa. All policies have a personal property limit. If you own items such as expensive jewelry or rare collectibles it is imperative you relay that to your agent and purchase enough insurance that any losses are fully covered. If you live in an area where natural disasters frequently occur be sure your policy covers any damages that may occur along with coverage for a hotel during the time you are unable to live at home. 

Homeowners insurance also has limits when it comes to personal injury and liability. Your policy will also cover any legal expenses for injuries of others that occur on your property.

KEY TAKEAWAY: It is the buyer’s responsibility to obtain homeowners insurance from an insurer before settlement. The lender will likely ask for the insurer’s contact information that is associated with your loan. Learn more about financing and loan options here!

Title Insurance

Title insurance is entirely different from homeowner’s insurance. Title insurance protects the actual ownership of your property. Before you buy your home, your lender will complete a lien search on the property to be sure you can purchase it without any legal problems. 

After purchasing the property, it is your title insurance that will keep others from claiming it is as their own. Just as there are criminals out there stealing victims’ identities, there are criminals who pull scams when it comes to property titles. For example, a criminal may sell the title to your home to an unknown buyer. Title insurance covers any legal expenses when homeowners face someone trying to claim the property as their own. Most lenders will require borrowers to carry title insurance throughout the life of the loan.

KEY TAKEAWAY: This insurance protects you, the buyer, and the lender from the possibility that your seller doesn't or previous sellers didn't, have free and clear ownership of the house and property, and, therefore, can't rightfully transfer full ownership to you. This is generally a lender requirement. 

IN SUMMARY

To sum up the two different types of insurance, title insurance is to protect both the borrower (homeowner) and the lender from any possible financial loss experienced from a defect in the title of the property. Homeowner’s insurance is the policy that protects the home, structures on the property, personal property, and liability for accidents. They are both equally important and necessary policies for homeowners. 

Considering buying a home? Learn more about what Covid-19 means for the market.

Khalil El-Ghoul

Discover our 2.25% Full Service Listings and Buyer Rebates. Khalil is dedicated to guiding home buyers and sellers with expert advice and objective information. For professional real estate assistance, text Khalil at 571-235-4821 or email khalil@glasshousere.com today.