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When you’re buying a home, you probably have a million questions that need answering, especially when it comes to getting the proper insurance to protect your investment.
Soon-to-be homeowners may see both title and homeowners insurance on the lending documentation and wonder what the difference is between the two. While both types of insurance can provide vital coverage for homeowners, they differ vastly in their purpose and protection.
Key Points
• Homeowners insurance helps protect your home, personal belongings, and finances from covered damages, losses, and liability claims.
• Homeowners insurance is generally an ongoing expense, while title insurance is typically a one-time cost paid during the home-closing process.
• Standard homeowners insurance generally does not cover floods or earthquakes, so homeowners in affected areas may need separate coverage.
• Title insurance protects against certain financial losses caused by covered title defects, such as undisclosed liens or other ownership issues.
• Buyers can typically purchase owner’s title insurance to protect their financial interest in a property, while lenders may require a separate title policy to protect their own interest.
What Is Homeowners Insurance?
A homeowners insurance policy protects a home and personal property from loss or damage. It may also provide insurance in the event someone is injured while they are on the property.
Here are some common things homeowners insurance may cover:
• Damage that may occur in the home, garage, or other buildings on the property
• Damaged, lost, or stolen personal property, such as furniture
• Temporary housing expenses if the homeowner must live elsewhere during home repairs
Depending on the policy, homeowners insurance may also cover:
• Physical injury or property damage to others caused by the homeowner’s negligence
• An accident that happens at home, or away from home, for which the homeowner is responsible
• Injuries that take place in or around the home and involve any person who is not a family member of the homeowner
• Damage or loss of personal property in storage
Some coverage may also apply to lost or stolen money, jewelry, gold, or stamp and coin collections.
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Buying Homeowners Insurance
While someone can legally own a home without taking out homeowners insurance, the mortgage loan holder may require the homeowner to purchase an insurance policy. Typically, lenders do require this as a condition of the home loan.
It’s important to understand that homeowners need to insure the home but not the land underneath it. Some natural disasters, such as tornadoes and lightning, are covered by typical homeowners policies. Floods and earthquakes, however, are not. If you live in an area where floods or earthquakes are common, you may want to consider purchasing extra insurance to cover damages from potential disasters.
Special coverage may also be worthwhile for those who own valuable art, jewelry, computers, or antiques. There are two policy options that can help homeowners replace insured property in the event of damage or a loss. Replacement cost coverage covers the cost to rebuild the home and replace any of its contents, while actual cash value simply pays the current value of the property at the time of the loss.
When it comes time to shop for and buy homeowners insurance, start by asking trusted friends, family, or financial advisors for their recommendations. Do some online research, too. Before you make a final decision, contact multiple companies and request quotes in writing to compare their offerings. That process can give you a good idea of who is offering the best coverage for the most affordable price.
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What Is Title Insurance?
Title insurance provides protection against losses and hidden costs that may occur if the title to a property has defects such as encumbrances, liens, or any defects unknown when the title policy was first issued.
The insurer is responsible for reimbursing either the homeowner or the lender for any losses the policy covers, as well as any related legal expenses.
Title insurance can protect both the homeowner and lender if the title of the property is challenged. If there is an alleged title defect, which the homeowner may be unaware of at the time of purchase, title insurance can provide protection to cover any losses resulting from a covered claim.
The policy will cover legal fees incurred if there is a claim against the property.
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Buying Title Insurance
Both homebuyers and lenders can purchase title insurance. If the homebuyer is the purchaser, they may want to insure the full value of the property. (The value of the property will affect how much the policy costs.) When the lender is the purchaser, they typically only cover the amount of the homeowner’s loan. When it comes time for a homebuyer to purchase title insurance, they have full choice of the insurer.
According to the Real Estate Settlement Procedures Act (RESPA) of 1974, the seller cannot require the homebuyer to purchase title insurance from one certain company.
Lenders are required to provide a list of local companies that provide closing services, of which title insurance is just one. But it may be worth doing independent research. Lenders may not select their recommendations based on the homebuyer’s best interest, but instead because a service provider is an affiliate of the lender and provides a financial incentive in exchange for a recommendation.
Again, it’s a smart idea to seek the counsel of friends and family and do online research to uncover competitive prices and learn which service providers have a solid reputation.
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The Takeaway
Homeowners insurance is an ongoing cost (billed monthly, quarterly, or annually) that helps cover damage or loss of the home and possessions within the home. Title insurance, on the other hand, can help protect against losses caused by defects in the title and is a one-time fee payable during the closing process. The advantage to having both types of coverage is that each policy can protect homeowners against financial loss in very different circumstances.
If you’re a new homebuyer, SoFi Protect can help you look into your insurance options. SoFi and Lemonade offer homeowners insurance that requires no brokers and no paperwork. Secure the coverage that works best for you and your home.
Find affordable homeowners insurance options with SoFi Protect.
FAQ
What is the difference between homeowners insurance and title insurance?
Homeowners insurance helps protect your home, belongings, and finances from covered damage, losses, and liability claims. Title insurance protects against certain financial losses caused by covered problems with the property’s title or ownership history.
Is homeowners insurance required when buying a home?
You can generally own a home without homeowners insurance, but mortgage lenders typically require it as a condition of the loan. Homeowners insurance can also help protect your investment from covered losses and damage.
Do I need both homeowners insurance and title insurance?
If you’re buying a home with a mortgage, your lender will typically require homeowners insurance and a lender’s title insurance policy. You may also choose to purchase owner’s title insurance to protect your own financial interest in the property.
This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.
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