What is Title Insurance?
A title insurance policy protects property owners and lenders from losses that could result from disputes over ownership of a property's title. This could include fraud, liens against the property, or errors missed during a title search.
Title insurance is important because it protects you from title hazards that could threaten the financial investment you have made in your home or other property. It also protects the lender's investment.
There are two types of title insurance:
An owner's title insurance policy guarantees that the buyer has the right to the property. It usually covers the cost of any legal fees that arise if you have to defend your claim. The cost is based on the price of the property.
Title insurance is issued for a one-time fee usually due when you are closing or settling the real estate transaction. Insurance benefits are paid only to the name that is on the policy. Coverage lasts as long as you hold title to the property.
A lender's title insurance policy protects the bank or other lending institution that issues your mortgage from any losses resulting from disputes over who owns the property.
A policy covers the amount of the loan and the cost is based on the amount of that loan. Most lenders require this coverage, which ends when the mortgage is paid.
Owner's title insurance protects you from:
- Fraud associated with the title ownership
- Liens existing against the property at the time the policy was issued
- Mistakes in the public record that are not caught before the sale
- Inaccurate or conflicting wills and trusts related to the title
- Missing heirs who suddenly appear and claim to own the property
- Forged or misfiled deeds and other documents
- Errors or flaws in the title that are not discovered during the initial title examination
Lender's title insurance covers the amount of the mortgage loan and protects the lender's interest in the property if any of the above risks occur.