What is the difference between title insurance and homeowners insurance?

UPDATED: Jun 28, 2011

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UPDATED: Jun 28, 2011Fact Checked

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Asked June 28, 2011

1 Answer

A lender may require you to have title insurance and homeowners insurance as a condition of the home loan. Title insurance is used to guaranty the lender that you have the right to own the property and that it is not listed as the property of another person or corporation. Home insurance is intended to insure the structures and personal property on the portion of real estate covered by the title insurance. Title insurance insures that you own the particular plot of ground, and home insurance protects the items you have placed on that plot. Title insurance is often included in your mortgage, but home insurance is generally your responsibility outside of the home loan.

On the other hand, a third type of insurance is typically included in the loan, and that is mortgage insurance. This type of insurance is how the lender is protected if the structures on the property were destroyed or the property is altered for other uncontrollable reasons. This type of policy pays directly to the lending institution, and tends to have a diminishing premium as the mortgage price is paid down.

Homeowners insurance protects the structures and the property contained on the premises, mortgage insurance protects the lender against loss, and title insurance is used to prove that the piece of land you are buying is actually available for ownership. For instance, the Brooklyn Bridge is not for sale, no matter how many people may offer to sell it to you, and title insurance protects you from investing in a real estate fiasco, perhaps investing your savings into a property that is not up for the taking.

Answered June 28, 2011 by Anonymous

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