What is the difference between title insurance and homeowners insurance?
Homeowners insurance and title insurance are two totally different types of insurance coverage that protect against different risks.
Homeowners insurance covers loss or damage to your home; other structures on your property; personal property kept in your home; loss of use; liability; and medical expenses for accidents that occur on your property. (Get the low down on Home Insurance coverage at Home Insurance 101).
Title insurance, on the other hand, protects your ownership in the real property. Title insurance guarantees that you have true entitlement to the property. Many lenders will require you to carry title insurance so they know for sure that you have clear ownership of the property and the home.
A title insurance company will conduct research before a loan is approved and they search for any outstanding liens, encumbrances or other defects that may hinder the property ownership from becoming solely yours. Once the Title Insurance company is sure that that property does not hold any such liens, the Title Insurance Company will issue title insurance. This protects the owner from anyone else trying to claim ownership of the property.