Your banker will ask you about title insurance when you buy a home, whether your first or 15th. Title insurance is available for lenders as well as homeowners. Not to be confused with home insurance, title insurance protects your ownership rights to a piece of property. Home insurance protects your home from damages caused by a covered claim.
When purchasing a home with a loan or mortgage, your lender will most likely add in a policy to protect themselves for the loan amount. A lender’s title insurance policy does not cover what you have invested in the property and does not provide you with insurance for your home.
A lender’s title insurance policy protects them for the amount of the loan they provide you. So, if you took out a $100,000 loan, their policy is designed to protect their loan. If the property is worth $300,000, the bank only cares about the $100,000 they lent you. A homeowners title insurance policy protects you for the value of the property.
We recommend considering both policies in the home buying process if you take out a mortgage. The lender will typically require you to pay for their policy as a loan condition, which is easy. Taking out an additional policy to protect your investment could be the best thing you can do to protect yourself in the transaction. Any time there is a disparity between what you borrow and how much you’re paying for the property. It is critical to consider taking out your own title insurance policy.
What You Should Know About a Homeowners Policy
A homeowners policy does all the following and more:
- Protects the value of the home rather than merely the cost of the land. A Lenders’ policy only covers the amount they lent you for your home. Not the full purchase price.
- Optional coverage – Homeowner’s title insurance is usually an elective coverage. We recommend purchasing inexpensive owner’s title insurance coverage to protect your investment.
- Not home insurance – Don’t confuse this with a homeowner’s policy. It will not repair or replace damage to your home.
- Should you get it – Property owners should purchase a title insurance policy to protect their investment. It also makes the property easier to sell down the road.
Any Questions?
Cortes and Hay have provided owner’s title insurance policies for over 50 years. Get in touch with us today to learn more about how an owner’s title insurance policy protects you and your investment for as long as you own your property.