When something goes wrong with your home and you suffer a loss, you need to be able to rely on your insurance coverage. Knowing which of your insurance policies to turn to isn’t always easy. Title insurance and home insurance both offer important protection, but many get them confused. So, what’s the difference between home insurance and title insurance?

what is home insurance?

Home insurance is a type of property insurance that can provide coverage for:

• losses from damage to your residence as well as other structures on your property;
• losses from property damage due to natural disasters like fire and windstorms (flood and earthquake coverage is often a separate purchase);
• stolen or damaged items in your home;
• potential liability or medical coverage if someone gets hurt on your property.

Many lenders require their borrowers to buy home insurance as a condition of securing a mortgage.

what makes title insurance different from home insurance?

A title insurance policy protects your title, which is your legal ownership of the property. It can provide coverage for a number of risks stemming from title defects, which prevent free and clear ownership. It can also cover losses due to encroachment and zoning issues, unpermitted work by a previous owner, and even title fraud.

When you buy home insurance, it’s to prevent losses from events that might occur in the future. Most title insurance coverage focuses on existing, unknown issues or defects relating to the property and/or its title. It’s a subtle difference, but an important one. Unfortunately, one of the most common reasons we have to deny claims for is because the homeowners thought they had a title insurance policy when all they had was home insurance.

THERE ARE LENDER AS WELL AS HOMEOWNER TITLE INSURANCE POLICIES

Title insurance does more than just protect you once you take ownership of your property—it can help the closing process itself go more smoothly. That’s one reason why many lenders require borrowers to purchase a lender title insurance policy or loan policy as part of getting their mortgage. To get protection for yourself, you also need a homeowner title insurance policy. Knowing the distinctions between the two policies can save you from losing out.

TITLE INSURANCE IS A ONE-TIME COST

One big difference between home insurance and title insurance is the way their premiums are set up. You pay for home insurance every month, and that payment potentially increases if you have to make a claim. With title insurance, you buy your policy with a one-time premium that’s based on your property’s location and size. The premium also varies by province, but $150 – $350 is a reasonable range to expect based on average 2021 home prices.

HOW LONG DOES TITLE INSURANCE LAST?

Your homeowner title insurance policy lasts as long as you have an interest in the property. The policy can also pass to your heirs or other beneficiaries if they inherit title from you.

Your lender title insurance policy lasts as long as your mortgage does. That means that if you refinance the mortgage with a new lender, you might need to get a new lender policy. Home insurance coverage isn’t normally affected by refinancing, as long as you keep paying the monthly premium. Your lender may require you to show proof of home insurance for a refinance, just like with a new mortgage.

which type of insurance is better?

Title insurance and home insurance cover different risks of home ownership. Having both policies can help you properly prepare for what the future may bring. The risks that title insurance covers are both expensive and hard to anticipate, but protecting yourself is simple. For a one-time premium, you can make sure you’ve got the coverage you need with a homeowner title insurance policy from FCT.

Buying a home is one of the largest investments you will ever make! In order to make your home hunting experience the best it can be, there are a few key mistakes to avoid and be aware of before you start your journey:

1. Not Getting Pre-Approved: One of the most important aspects of buying a home is the mortgage application and approval process. No matter what type of home you are looking for, you will need a mortgage. One of the biggest mistakes when it comes to the home-buying process is NOT getting pre-approved prior to starting your search. Getting pre-approved determines the actual home price you can afford as it requires submission and verification of your financial history to ensure the most accurate budget to fit your needs.
2. Not Setting or Following a Pre-Determined Budget: Another mistake that people make when home-hunting is not setting, or following, a pre-determined budget. It can be tempting to start looking at the top of your budget, or even slightly over, but when you consider closing costs and the long-term financial responsibility of home ownership, it is best to avoid maxing yourself out. Getting pre-approved will help determine what you can afford, as well as making an appointment with your mortgage broker to determine your financial situation and the best options for you now, and in the future.
3. Not Hiring a Real Estate Agent: Your mortgage broker and your real estate agent are two of the most important members of your homebuying A-Team! In today’s competitive real estate market, it can be very difficult to acquire property without the help of a realtor. One reason is that realtors can provide access to properties that never even make it to the MLS website! They can also gain access to information about homes that may come onto the market, before a listing is even signed. Most importantly though, a realtor understands the ins-and-outs of the home buying process and can tell you how to be successful in your endeavors to purchase a home by guiding you through the process from the first viewing to having your bid accepted.
4. Focusing Too Much on Aesthetics: While we understand that bad interior design can really affect the perception of the home, you don’t want to be blindsided by it. At the end of the day, aesthetics can always be updated! Giving up the perfect price or location or size for a few aesthetic details (such as paint color, flooring, or even outdated appliances or light fixtures) is one of the biggest mistakes people make! Most homes have incredible bones that only need some minor tweaks to become your perfect space.
5. Not Thinking Ahead: What you want and need in a house today, could be very different from what you want and need in a house in the future. It is important to be able to look ahead – are you planning on having children? Are your parents getting older and in need of a retirement space? These are things that are good to take into consideration when buying a new home. Buying a home isn’t a permanent decision as you can always sell your home later on if it doesn’t work for you in the future, but it is almost always easier to plan ahead so you can grow with—and not out of—your home whenever possible.

If you are looking to purchase a new home, whether your first space or a step-up from your current living situation, I would be happy to help! Please don’t hesitate to reach out to set up a virtual appointment and discuss your mortgage options, pre-approvals and everything you need to know BEFORE you get started.

Written by my DLC Marketing Team