When you are moving forward with the purchase of a home or building, you have a lot of decisions to make about optional protections to place on the purchase of the property. Homeowner’s insurance and title insurance are just some of these options.
However, many people become confused about exactly what these types of policies do, whether they need them and even whether homeowner’s insurance is the same thing as title insurance. In order to make an informed decision about what type of insurance you should select, you need to fully understand what each can accomplish for you and what insurance will not typically cover.
Are Title Insurance and Homeowner’s Insurance the Same Thing?
Because these are both types of insurance that are meant to protect you from financial burdens after purchasing a home, many people assume that title insurance and homeowner’s insurance are the same thing. However, this is not true; both types of policies function very differently.
A homeowner’s insurance policy protects your home physically against some forms of damage and the need for repair. A title insurance policy safeguards against issues with your property’s title, either at closing or after. While homeowner’s insurance is typically paid for on a monthly basis (often at the same time that you pay your mortgage), title insurance is usually paid as a lump sum when you close on a home, after which you are protected.
What Homeowner’s Insurance Can Do for You
Homeowner’s insurance is meant to protect you against sudden, large and unexpected financial burdens associated with owning a home. If a tree crashes into your roof, your homeowner’s insurance policy may cover repairs. If your home is destroyed, you may receive a payout from your insurance in the amount of the value of the home in order to rebuild it.
However, be aware that homeowner’s insurance does not cover everything, and even some issues that appear to be covered may come with caveats. It is important that you read your policy carefully to understand what it covers and what it does not.
What Title Insurance Does During and After a Home Purchase
Title insurance has nothing to do with any damages to your home, which is why it is an entirely separate type of policy. Instead, title insurance protects you against the financial consequences of discovering an issue with the title of your home. Your title indicates that you are the rightful owner of your own property.
If previously unknown heirs appear, or if there is a lien or judgment against the property that you formerly did not know about prior to purchase, you would be financially responsible for the consequences. Title insurance protects against these events by providing a fix to the problem or financial compensation for the legal process of sorting out these issues.
Do You Need Both?
If you would like to be as protected as possible, purchasing both a homeowner’s insurance policy and a title insurance policy would be wise. As always, be sure to read the fine print of both so that you understand what you are agreeing to. Many people wrongly assume that any title checking done during the closing process is sufficient to dispel the fear of title issues. This is not the case.
Title evaluation done during a home purchase does not guarantee against title problems, and insurance can still protect you and the equity you build in your home should something go awry. Additionally, because you pay for title insurance as a lump sum at closing and not as a monthly installment payment, it is simple to add it on to your closing costs and then benefit from its protection without a long-lasting financial burden. For these reasons, do not forget to consider title insurance alongside homeowner’s insurance when you purchase a property.
The Expert Title Insurance Pros Can Answer Your Questions
Whether you are considering buying title insurance or simply have questions about whether you need it and what it may do for you, be sure to work with professionals who are familiar with property titles and the legal work surrounding them. The experts at Mathis Title Company would be happy to help you explore your options and answer any questions you have. Reach out to schedule an appointment to discuss title insurance and how it can help you during and after your closing.