Boring Title: The Difference Between Homeowners Insurance and Title Insurance

Title insurance is boring, but Allied Title & Escrow is here to decode the jargon and make it (somewhat) more interesting. This biweekly feature will explore the mundane (but very necessary!) world of title insurance while sharing interesting stories of two friends’ entrepreneurial careers.

When you purchase a home, it can be one of the most exciting times of your life.

With a home purchase, however, comes a lot of responsibility, and you want to protect your best investment. Therefore, you need to make sure your home stays in tip-top condition and is free of any encumbrances.

In order to do so, it’s always a wise decision to purchase both homeowners and title insurance. While both types of insurance protect your home, there are some very fundamental differences between the two types of coverage.

What is Homeowners Insurance?

Homeowners insurance is a policy that covers any damage or any type of loss to your home. It also covers damage on any other structures that are on your property, any subsequent liability, medical expense or if someone hurts themselves on your 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.

What is Title Insurance?

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.

There are two types of title insurance policies:

• 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. If you purchase the enhanced policy, it covers 150% of the value of your home after five years.

What are the Differences Between Homeowners Insurance and Title Insurance?

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.

What are the Similarities Between Homeowners and Title Insurance?

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.

Have questions related to title insurance? Email Latane and Matt at [email protected]. Want to use Allied Title & Escrow when you buy a home? Tell your agent when you buy a house to write in Allied Title & Escrow as your settlement company!