As a homeowner, one of the most important investments that you should consider is an insurance policy. After all, you want to make sure your property and everything in it is always protected. However, a lot of people gets confused along the way when trying to find the right coverage for their property. In this article, we will be sharing the differences between title insurance and homeowners insurance.
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Title insurance is an important insurance policy as it provides protection to your ownership interest in the property. Most lending or mortgage company may require homeowners to secure title insurance. This insurance will guarantee that you have the true entitlement to the entire property. When getting title insurance, your insurance company will check and resolve any defects in the title such as prior encumbrances and liens or any other defects that may cause issues in the future.
In case another person will claim ownership to your property, your title insurance will cover any legal expenses. So having title insurance means your property is covered in case there are other people who will claim your property through defects and gaps found in the title itself.
Mortgage Title Insurance
Another reason for the confusion with the types of insurance is mortgage title insurance. A mortgage title insurance is not really for the homeowner but for the lenders. This type of insurance protects a mortgage company in case the property owner defaults on their mortgage.
One of the major insurance that you should have, is a homeowners insurance. In its most basic form, a homeowners insurance policy protects the structure of your home from perils that may cause damage. There are several types of homeowners insurance available in the market today. The most common of which is the HO-3, which provides protection against almost all kinds of perils except those that are stated in the policy.
A homeowners insurance is typically a requirement when you are applying for a mortgage. A bank or a mortgage company will require you to present proof of insurance before a mortgage can be approved. Typically, homeowners insurance will cover four incidents which include exterior damage, interior damage, loss or damage of personal items, and injury that may be caused by a covered incident.
In most cases, when a claim is made on a covered peril, the homeowner will be required to pay an amount known as a deductible. This is an out-of-pocket expense for the homeowner. For example, when you make a claim on a damaged interior due to a small kitchen fire. The cost of the expenses to make the kitchen livable again will be estimated by an insurance adjuster. Depending on the cost, you will be informed on the actual deductible that you need to pay before the payment is released. Your deductible will rely on the amount that you agreed when you purchased the policy.
Homeowners insurance is also under a liability limit which will determine the amount of the coverage. The standard limit is typically at $100,000 but most policyholders have the option to get a higher liability limit. Liability limits play a huge role when there is a claim being made. This is the key term that sets the percent of the covered amount for the repair and replacement of damaged parts of the house or items, as well as, the cost to live somewhere else while the property is being repaired.
The HO-3 policy is the standard home insurance coverage in the market today. This insurance type is the most recommended since the HO-3 delivers the most general coverage which includes protection for the structure, belongings inside the house, and against injuries due to a covered peril. HO-3 insurance is considered the best choice for owner-occupied homes.
HO-3 Insurance delivers coverage for at least six types of loss including:
- Dwelling – Protects your home’s structure including attached fixtures.
- Unattached Structures – Structures inside your property that are unattached to the main dwelling, for example, small sheds, fences, driveway, detached garage, and similar structures.
- Personal Belongings – Such as furniture, appliances, clothes, and more.
- Personal Liability – Provides protection against lawsuits due to accidents that can happen in your property.
- Loss of Use – Reimbursement for your expenses in case you will not be able to stay in your home due to repairs or rebuilding.
- Medical Payments to Others – Reimbursement for your expenses in case guests are injured while they are inside your property.
You also need to note that a HO-3 homeowners insurance has multiple exclusions on covered losses. It is important that you talk to your insurance company that will be releasing the policy. Some items inside your home may not be covered, these include collectibles, valuables, and other expensive items. Additionally, items like jewelry, firearms, coins, fur, and fine art will typically be given a pre-determined limit coverage.