Purchasing a home is one of the larger investments you will make and it is only natural that you will be filled with a lot of anticipation (and anxiety) for what is to come. Yet, this purchase carries with it a lot of responsibility. When it comes to protecting your investment, both title insurance and homeowner’s insurance can protect you, but what is the difference? In this blog, we will compare title insurance vs. homeowner’s insurance and describe the similarities and differences, so that you can make an informed decision.
What is Homeowner’s Insurance?
Many mortgage lenders require borrowers to have homeowner’s insurance for the full purchase price of the home and will not allow you to take a loan out without proof of coverage. While it is required by lenders, homeowner’s insurance is also a necessity for protecting you and your home. Homeowner’s insurance is a policy that covers destruction and damage to the home, loss or theft of possessions, as well as personal liability for harm to others. Paid annually, your homeowner’s insurance will cover most incidents that occur on your property. However, there are some insurance providers that will require separate coverage to be purchased for hurricanes, floods, and other natural disasters.
Similar to most insurance policies, homeowner’s insurance is divided into separate levels of coverage.
- Actual Cash Value: This coverage will cover the cost of the home plus the value of your belongings minus depreciation.
- Replacement Cost: The replacement cost policy will cover the actual cash value of your home and the possessions without the deduction of depreciation.
- Guaranteed Replacement Cost: This coverage will cover whatever it costs to rebuild or repair your home.
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While homeowner’s insurance protects you from future events, title insurance will protect you from past occurrences that may affect your title to the property. A title insurance policy ensures that you are the owner of the property and that it cannot be taken away due to defects or liens in your home’s title. Before the home is officially yours, our team will perform a title search to ensure that the title is clear, however, title insurance will protect you if any defects or claims surface in the future.
What is Title Insurance?
While homeowner’s insurance protects you from future events, title insurance will protect you from past occurrences that may affect your title to the property. A title insurance policy ensures that you are the owner of the property and that it cannot be taken away due to defects or liens in your home’s title. Before the home is officially yours, our team will perform a title search to ensure that the title is clear, however, title insurance will protect you if any defects or claims surface in the future.
Similar to homeowner’s insurance, your mortgage lender may require you to purchase a lender’s policy which protects them against any title defects or claims. We recommend that homebuyers also purchase an owner’s policy to protect themselves against any title claims. Title insurance is a one-time fee and both policies can be purchased as a bundle to guarantee your ownership of the home is protected while you own it.
Title Insurance vs. Homeowner’s Insurance – It is Your Choice
When it comes to navigating the world of homeownership and insurance, we recommend purchasing the amount of coverage that you believe is best. In the end, both title insurance and homeowner’s insurance are probably both required, but the amount of coverage you purchase can be your choice. As long as you feel that your investment is protected, we congratulate you on this amazing milestone.
To learn more about title insurance, please contact a member of our team today. We are always happy to help!
