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What should I know about title insurance?

On Behalf of | Mar 23, 2021 | Title Insurance Litigation

Investing in real estate is a great decision. Not only is it worthwhile financially, it also provides a home base to raise your family.  

While rewarding, buying a home involves many challenges. Along inspections and closing matters, you will also need to purchase title insurance. As explained by U.S. News & World Report, title insurance protects property owners and lenders from potential losses.  

What are title defects?

The purchase of title insurance occurs in conjunction with a title search. Title searches look for defects in the housing title, which covers a range of occurrences.  

Liens, or legal claims on a property, are commonly found during title searches. For instance, if the previous owner had work performed but failed to pay the contractors, there may be a lien for the amount still owed. Unpaid property taxes can also incur liens on properties.  

In other cases, forged ownership documents mean the “seller” actually had no right to put the real estate up for sale. Title searches involve exhaustive searches of public records to look for these and other issues.  

Are there different types of title insurance?

There are two types of title insurance: 

Lender policy

These policies cover the financial institution lending money to the buyer for purchase of the home. They protect the lender from costs related to potential legal issues regarding the real estate. Lender policies are often a condition of receiving a mortgage.  

Owner policy

Owner policies protect the new owner of a home. You can usually purchase an owner policy from the same insurer as the lender policy.  

The good news is that title insurance incurs a one-time cost, unlike other insurance policies that cover the home. It is best to compare rates before agreeing to a specific policy to keep costs manageable.