What Is Title Insurance?
A title insurance policy is an insurance you buy with a one-time payment to a title company and lasts as long as you own the property insured by the policy. This insurance protects against previously unknown claims that may harm your property value or ownership rights.
WHY YOU NEED TITLE INSURANCE
When you purchase a home, you must get what you have paid for. Problems (or “defects”) with title can limit your property’s use or enjoyment and result in significant financial losses.
THE TITLE SEARCH
After your real estate contract is fully signed, a title insurance professional will search the public records to identify any potential complications in the title (see below for other common title problems).
THE LENDER’S POLICY
There are two broad types of title insurance policies: A lender’s policy, which protects the person or company loaning money for a real estate purchase, and an owner’s policy, which protects the new owner. The lender’s policy is usually based on the outstanding loan amount and protects the lender’s security in the property. Importantly, a lender’s policy does not protect the buyer. Buyer(s) should consider a separate policy: the owner’s policy.
THE OWNER’S POLICY
Sometimes, title problems that weren’t initially discovered in the public records or search process arise. An Owner’s Policy protects against these risks and is usually issued for the total purchase price of the real estate transaction. Only an Owner’s Policy protects the buyer when a covered title problem arises. Some such issues include:
- Errors or omissions in deeds
- Mistakes in examining records
- Forgery
- Undisclosed heirs
- Liens for the benefit of other properties
An Owner’s Policy assures that your title company will stand behind you — monetarily and with legal defense, if necessary — if a covered title problem arises after you buy your property.
