The importance of title insurance

What is title insurance - and why do I need it?

Title insurance is an insurance policy that covers you if title problems come up after you buy or refinance a property. Possible complications that cannot be discovered through even the most thorough title search include lost, forged or incorrectly filed deeds.

For example, if an unknown heir makes a claim on the property you just bought, you may be held responsible. Without title insurance, you might have to pay legal costs to settle a dispute. If you lose a dispute, it could cost you money, the equity you have in your home and perhaps even ownership. Title insurance is designed to cover associated legal costs to settle the dispute and/or to resolve the problem.

Remember,  your lender will require a lender’s title insurance policy to cover their interests- make sure you secure a policy that secures yours.

Title insurance FAQs

What is Title Insurance?

Owning real estate is both a dream and significant investment for many people. You want the assurance that the home you are buying truly belongs to you.

How can a piece of property you purchase not belong to you? Undetectable flaws in a title, such as fraud or undisclosed heirs,  can jeopardize your claim to your property.

Title insurance takes care of this risk by protecting you from a title defect that occurred in the past. If a defect shows up in your title, (say, someone fraudulently signed a document and now claims you owe them a sum of money)  then an owner’s title policy provides a few things:

  • Protection from financial loss due to demands charged against the title to your home
  • Payment of legal costs if you need defense against a covered claim
  • Payment of successful claims against the title to your home

Most types of insurance, such as auto, health, and renter’s insurance, cover against losses that may occur in the future. An owen’ers title insurance policy

Why do I (the buyer) need title insurance?

Without title insurance, you are not fully protected against errors in public records, hidden defects, or mistakes in the examination of the title.

In essence, you could be personally liable for any prior liens, judgments, or claims brought against your new property.

With title insurance, if this occurs, you will be defended at no cost against all covered claims up to the amount of the policy.

What does title insurance cost, and how often do I have to pay it?

Title insurance is purchased only once, at a fraction of the overall cost of other types of insurances, and lasts as long as you own the home.

The insurance commission controls the premiums for title policies, which depend upon the purchase price of the property.

What is a lender's policy?

Lenders require buyers to cover the cost of a lender’s (or loan or mortgage) policy. This protects the lender against losses due to unknown title defects.

The policy only protects the lender’s interest – it doesn’t protect the purchaser If you’re purchasing real estate, you need an owner’s policy.