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Homeowner’s Insurance vs. Title Insurance

Updated: Jan 22

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Acquiring a residence has the potential to be one of life's most thrilling endeavors, and ensuring the safeguarding of your newfound investment should be a primary consideration. Whether you're making a cash purchase or opting for a loan, it is highly advisable to secure both homeowner’s insurance and title insurance to ensure the enduring protection of your home. Yet, what sets homeowner’s insurance apart from title insurance? And why is it imperative to have both types of coverage?

Homeowner’s insurance offers protection against potential future events that affect your home, its contents and your personal belonging, whereas title insurance shields you from past occurrences related to the title to your real estate that might be concealed or unknown. Both types of insurance can have significant financial implications for homeowners. As such, let's delve deeper into their distinctions.

Homeowner’s Insurance

Many individuals widely recognize the advantages of homeowner’s insurance and it is usually required by your lender if you have a mortgage. This type of policy, paid monthly, quarterly, or yearly, encompasses various protections to cover the costs of repairing or replacing your dwelling and possessions if they suffer damage from specific risks. Among the areas covered by homeowner’s insurance are your belongings within the residence and personal liability coverage for any bodily harm or accidents involving visitors that may occur on your property. While homeowner’s insurance might extend to encompass damages inflicted upon your property or its contents by natural calamities such as floods or storm damage, coverage differs in different states. Supplementing a standard policy with additional coverage options like earthquake or flood insurance is possible.

Title Insurance

Title insurance serves as a means to safeguard against potential monetary setbacks and associated legal costs in case a flaw in the ownership rights to your property, covered by the policy, emerges. Under title insurance, specialists scrutinize your property's historical background and strive to resolve any ownership discrepancies before finalizing the acquisition. Another unique aspect of title insurance is that it doesn't involve recurring monthly payments. Instead, it involves a single premium payment made at the time you purchase the property.

There are two types of policies available in a typical purchase transaction:

  • Loan Policy - Lending institutions commonly mandate a loan policy involving an initial upfront payment. Lenders make it a prerequisite to obtain title insurance to safeguard their stake in the loan. This precaution is particularly crucial given that they hold a significant share of the property's value, particularly in the initial phases of a mortgage. Upon issuance, the loan policy provides protection exclusively to the lender with regard to the legitimacy, enforceability, and precedence of its claim against any title-related imperfections. This premium is paid at the time of closing. Its value is limited to the outstanding balance of the mortgage at the time of the claim.

  • Owner's Policy - While the title policy offers the lender protection, the owner's investment in the property might still face potential jeopardy. Without an owner's policy, the title insurance company will exclusively address claims pertaining to the insured lender if any title-related issues arise post-purchase. The buyer should secure an owner's policy to safeguard themselves from inherent title-related risks. Similar to the lender's policy, this owner's policy is a singular purchase that provides long-term protection but its value is based on the purchase price of the property and therefore, generally, provides greater coverage to the homeowner. .

Conestoga Title Insurance

Since 1973, Conestoga Title Insurance Co. has solidified its reputation as a highly respected entity within the realm of title insurance. Conestoga Title stands as a stalwart presence, renowned for its unwavering commitment to delivering dependable title insurance to the real estate, legal, and financial sectors. The foundation of Conestoga Title's accomplishments is its dedication to cultivating strong connections via exemplary service, extensive expertise, and a firm sense of financial assurance. Call us at 800-732-3555 to learn more about title insurance.

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