Do You Need Homeowner’s and Title Insurance Policies?

Do You Need Homeowner’s and Title Insurance Policies

When buying a home, whether it’s your first or third, you’ll be asked if you want a title insurance policy, and probably be looking at homeowner’s insurance policies too.  Although they may sound the same, especially both the lender’s and owner’s title insurance when combined with the homeowner’s insurance, they each serve very different purposes.

  • A homeowner’s insurance policy can protect your home and your belongings in case of damage, but only based on what you agree to when signing. It could be natural disasters, malfunctioning appliances, or losing your home and valuables to fire or burglary.
  • A title insurance policy protects your ownership of the house itself, but not the property, land or the items inside. Just your ownership.  But there are two kinds of policies.
    • Lender’s title insurance – this plan protects the lender if you have a mortgage or took out money to buy the property.
    • Owner’s title insurance – this option protects you and your investment in case someone lays claim to the property.

Am I Legally Required to Buy Homeowner’s & Title Insurance?

No, you are not legally required to buy a homeowner’s or title insurance policy.  But there are many things which can go wrong, and if you want to have your house and your land protected, you will want to consider both policies.  With that said, it is also not legally required to get a lender’s title insurance policy either, but it may be required by the lender if you want their money.

Just like how you want to protect your property, money and yourself; lenders including banks and investors want to protect their companies and their assets.  By loaning you money, a lender’s title insurance policy provides them with a security blanket in case something goes wrong.  Many lenders add a stipulation to the loan that you must purchase a lender’s title insurance policy, but it is not a legal requirement.  However, if you don’t get it, they may not give you the money to buy the property.

Now that you know why they are both important, there is another frequent question that comes up.  Can the insurance policies transfer to someone else?

Whether it is a significant other, a child, a friend or a family member, your title insurance policy cannot transfer over, but they can purchase a new policy during the closing when they inherit or purchase the home from you.  Homeowner’s insurance on the other hand may not need to be repurchased depending on the situation.

If the other person’s name is already on the property, you can also have them sign or be added to the policy.  Now if the worst happens, you won’t have to worry.  The other question is about transferring the two policies.

Title insurance cannot be transferred to a new home if you move or buy a new house.  It only protects the deed on the property it was meant to cover.  Your homeowners insurance policy however could be applied to a new home.  The insurance company that wrote the policy may need to adjust it, but the process is pretty simple.

There are a lot of similarities in the names owner’s title and homeowner’s insurance, but as you can see they are very different.  One covers your home and the items inside, the other covers your ownership of the land and house.  Neither one is legally required, although this could change at some point, but they are both recommended.

Get More Tips Like These

If you like this post, you'll love our monthly newsletter! You'll get a new theme with ideas for your real estate business from marketing tips to legal advice. Subscribe today!

Get An Instant Quote!