Homeowners Insurance VS. Title Insurance: What's the Difference?
Buying a home is one of life’s biggest moments... But it’s also one of the most stressful moments of them all.
Especially when you’re faced with lots of jargon that sounds like gibberish.
That being said, one of the things that new homeowners tend to not quite understand is the difference between homeowner’s insurance and title insurance. New homeowners often have loads of valid and important questions, which we are going to answer below.
What is title insurance?
First and foremost, “title” refers to someone’s legal ownership of a property. That being said, title insurance is a policy that covers claims coming from third parties on issues that existed before you close on your home and that didn’t come up in the initial title search.
For example, if there is a lien on your home that you weren’t aware of before closing on your home, title insurance would be useful here as it would protect you from having to pay up for something that you, as the new owner, did not accrue.
Simply said, title insurance protects you against losses caused by problems related to the title of your property.
What is homeowner’s insurance?
This is the type of insurance you would normally think of when someone mentions “home insurance”. This insurance covers claims you make following certain events, such as a fire, burglary, vandalism, water damage, strong winds, etc. In addition, most homeowners’ insurance policies can cover things that are in your home that have important monetary value, such as jewelry, furniture, and other possessions of this sort.
Do you need both?
Now that you know the difference between both types of insurances, let’s answer the final and most important question: do you really need both types of insurances?
When buying a property, you are not legally required to purchase homeowners’ insurance, but most banks make it mandatory. Therefore, if you want to get a mortgage, you don’t really have a choice. However, you are not legally required to purchase title insurance.
While it may be tempting to not invest in a title insurance policy, we’d like to remind you that insurance is always bought to mitigate risk and help protect you against immense financial loss. Our recommendation is to make the investment so you can ease your anxiety, sleep better at night, and most importantly be covered for unforeseen claims made against the title of your home.
Ready to make the investment? Get in touch.