Both Policies Protect Your Investment, But They Are Not the Same
When buying a home, it can be one of the most exciting times of your life! The anticipation of a new neighborhood, more space to share with your family, or even less space if you are downsizing! With the excitement, though, comes the responsibility to protect your investment for years to come. The best way to protect your home is to purchase both homeowners insurance AND title insurance.
Some homebuyers, especially first-time homebuyers, may think that homeowners insurance and title insurance are interchangeable and wonder if they need both. The truth is while both policies protect your investment, they are very different and cover a variety of issues that can arise after the purchase of your new home.
What is the difference between homeowners insurance and title insurance? Essentially, homeowners insurance protects you from what could happen, and title insurance protects you from things that have already happened but may be unknown.
Let’s take a look at the differences between the two types of policies.
Most homeowners are familiar with homeowners insurance. This type of insurance has a premium that is paid monthly, quarterly, or yearly and includes coverages that help alleviate the financial burden associated with damages that arise from an unforeseen event like a fire, flood, or another emergency.
While policies vary depending on the type of coverage you select, homeowners insurance typically falls into six categories:
- Dwelling coverage: This is the most known coverage and protects a homeowner from natural disasters such as fire, water, storm, wind, and lightning. Flood coverage, which is different from water coverage, is usually purchased separately. For example, if your home has a burst pipe in the basement that causes water damage, your dwelling coverage will likely help pay for repairs. A flood caused by a tropical storm, however, may not be covered if you do not have flood insurance.
- Other structure coverage: This type of coverage protects structures on your property besides your home including sheds, detached garages, and fences.
- Personal property coverage: Personal property coverage protects everything INSIDE of your home – furniture, clothing, jewelry, electronics, books, and more. Note that depending on the level of coverage you have with your policy, there is a maximum amount of personal property coverage available to you.
- Personal liability protection: Sometimes accidents happen, and someone may get hurt or injured on your property. Personal liability protection will pay for legal fees if someone is hurt while visiting your home. Like other types of coverage, there is a cap on how much your policy will pay and you may have to pay the difference out of pocket.
- Medical liability coverage: Similar to personal liability protection, medical liability coverage helps pay for the medical expense of someone who is injured on your property but doesn’t want to go to court. This coverage will pay for things like medical visits, crutches, prescriptions, physical therapy, and more.
- Loss of use protection: While no homeowner wants to think the worst, sometimes a natural disaster makes a home uninhabitable. When there is a large loss like a house fire or storm damage that makes your home unsafe, loss of use coverage will help pay for a hotel room and food while your house is being repaired. Like other coverages, there is a limit so talk to your homeowners insurance provider about how much your policy will cover.
Title insurance is a type of insurance policy that protects your investment from things that have happened in the past but may not yet be known to you. During a title search, your title company will search, clear, and then insure the title to your home before you buy it. This insurance then protects your property rights for as long as you own the home.
Title insurance protects you from title defects such as:
- Forgery, fraud, or undue influence of the previous owner
- Unpaid taxes or other liens
- Clerical errors
- Unknown heirs
- Boundary disputes
Note that there are two types of title insurance – lender’s title insurance and owner’s title insurance. Lender’s title insurance is mandatory if you are borrowing money for the purchase of your home. Lender’s title insurance protects the lender solely and should ownership be disputed, they will get their money back.
Owner’s title insurance protects YOU and your financial investment should the title come into question. Unlike homeowner’s insurance, title insurance is a one-time fee paid at closing – in other words, there are no monthly premiums. Title insurance is an affordable policy to give you peace of mind you’re your investment is protected.
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Carrying both homeowners insurance and title insurance is the best way to protect your new home. If you are in the home buying process, let us help you with your title needs. At Watermark Land Transfer, we can conduct a thorough title search, clean the title, and then issue title insurance. We are also happy to answer any questions you have about buying a home and are here to help you with your home buying journey!
As a remote title company, we can coordinate your real estate closing and settlement at any location! We can meet you at your realtor’s office, your home, or even a coffee shop! We know how stressful buying a home can be – let us take some of the stress off of you!