As a Coral Springs title company, many of our clients ask us to clarify some of the technical terminology surrounding titles and insurance. One common question we hear is, “What is the difference between my homeowner’s insurance and my title insurance?”
These are, in fact, two very different types of insurance that need to be purchased separately when you are buying a home.
What is a homeowner’s policy?
A homeowner’s insurance policy covers your actual house, as well as any number of things relating to that house. A standard homeowner’s policy should cover the following:
- The physical structure of your home. You can claim on your insurance policy in the event that your home is damaged or destroyed, so your policy should be enough to cover the rebuilding of the entire structure. Most standard policies will cover your home against hail, lightning, fire, and wind, but not floods or earthquakes -so you may need to take out separate policies for those hazards, if you live in an area that is prone to either.
- Other structures on your property, like sheds, garages, barns, or fences. Again, you are typically covered for the same hazards as described above.
- A standard policy also covers your personal property to some extent: all the belongings in your house. Some policies set limits on how much they’ll pay out for high-value items (like expensive jewelry).
- Personal liability may also be covered by homeowner’s insurance. This is used in the event that someone is hurt while on your property, or suffers property damage by you or someone living in your home. Personal liability insurance covers your legal fees up to a certain amount.
- However, if someone is hurt on your property and does not necessarily want to sue, your policy can also cover their medical costs.
- Homeowner’s insurance can pay for alternative accommodation if your house becomes uninhabitable due to one of the aforementioned hazards.
It’s always best to consult your insurance provider and read your insurance policy carefully, as you may not receive full coverage for all of these instances. For example, your policy may only reimburse 50% of your personal property value if your home is burgled.
What is title insurance?
Title insurance, then, is a bit more abstract than homeowner’s insurance. Where your homeowner’s policy protects your physical property, or incidents that take place on your property, title insurance protects your rights to own and use that property.
This is why having a professional title search performed and obtaining title insurance during your property transaction is essential. Unlike other forms of insurance that calculate the risks of something going wrong, and then insuring you against that possibility, title policies are known as a ‘risk elimination’ model of insurance. As a title company, we try to reveal and eliminate as many potential title hazards as possible before you purchase your home.
There are two types of title insurance which may need to be purchased (owner’s title insurance and mortgagee title insurance will be required if you get a mortgage). Your owner’s title policy covers you against issues like outstanding mortgage payments or taxes against the property, utility and access easements, or if an undisclosed heir comes forward claiming that they have a right to the property. The policy can either pay outstanding fees, cover damage done to your property if the utility company needs to dig up your yard, or can pay your legal fees if you go to court to quiet a claim against your property.
For more information about title insurance and homeowner’s insurance in Coral Springs, contact Florida Home Title Company today.