What's the Difference Between Home Insurance vs. Title Insurance?
Do you know the difference between home insurance and title insurance? Are there differences in coverage? Have you wondered why you need one or the other? Well, you’re not alone. Many homebuyers and sellers have questions about these two types of insurance. And while they may seem similar at first glance, there are some key differences between them.
Home Insurance vs. Title Insurance
Homeowners insurance has an important purpose in protecting the items in your home, liability issues that may arise at your home and the physical structure of the home itself from certain types of damage. If something were to happen, a tree falls through your house or a storm hits you’ll be able to use your home insurance that covers costs in repairs and other damages when your home experiences an unfortunate event.
Title insurance is for your property’s title. It’s essentially ensuring that the day that you receive that property, you receive it free and clear of any lien or encumbrances, with the exception of any mortgage you might take out or something that you're aware of from the title search. But it also protects you throughout your ownership of that property. It's very thorough to cover you from a myriad of events that could happen. It ultimately ensures, that you own the property free and clear and can sell it when you want to without any issues from things potentially done by previous owners.
Working with a Title Company
A title company handles all the paperwork behind the scenes. You’ll also hear the term escrowed out a lot. The title company handles all the money as well. They get the contract from the agent, buyer, or seller if it's for sale by the owner and they handle the title search, preparation of documents, settling of all the funds, signing and notarizing of all the documents, as well as the recording and post-closing of any issues as well.
A buyer's transaction and a seller's transaction are going to be very different where oftentimes the title company will be working with a lender. In the event that the buyer receives financing, the title company has a whole layer of things they must work with the lender on to be sure all documents are properly prepared and executed for the loan.
Back to title insurance, there is a lender's policy to protect the lender as well. In that process, they will have documents and requirements that the title company has to meet for their specific loan or loan type. Both the title company and lender will work hand-in-hand on that side of things and work with the buyer as well.
Once the title company gets their title search back, they can see what is on the title that needs to be taken care of. What's on the title is typically a mortgage or two and maybe some liens that need to be paid prior to or at closing.
In Tennessee, we often do a split closing, meaning that the buyers would work with one title company and sellers work with another.
Are you considering buying a home before selling your current Nashville home? Give me a call at (615) 930-0313, schedule a call with me, or send me a message! I love helping people and using my financial and legal background to guide you in finding your dream home!