Title insurance is a form of insurance that protects against financial loss caused by defects in a property title. The most common claims filed against a title include back taxes, liens, and conflicting wills. It’s important to protect yourself from the possibility of these sorts of issues as they can become very costly. In the worst cases, they can cause buyers to lose homes.
Unlike traditional insurance, it protects against past blemishes, not future events. Things like:
- Forgery and fraud
- Incorrect signatures on title documents
- Ownership by another party
- Flawed record-keeping
- Outstanding lawsuits or liens
It’s a smart choice since it protects against a variety of potential losses, which may include the home itself. However, which kind do you need?
What are the Different Types?
There are two types:
- Lender’s Title Insurance – Almost all major lenders require borrowers to purchase a lender’s title policy. This protects the lender in the event that the seller is not able to properly transfer property rights to a new owner. It’s important to note that this only protects the lender – not the buyer.
- Owner’s Title Insurance – The owner’s title policy protects the buyer. Since title searches are sometimes erroneous, and in some cases only go back one deed, it’s important to be protected since the owner is still at risk of financial loss. Although the owner’s title insurance is usually optional, it can protect against loss incurred from discoveries made at a later date.
Where Can I Get it?
The closing agent typically initiates the insurance process upon completion of the purchasing agreement and can recommend one of several common underwriters such as Fidelity National Financial. Owner’s title insurance usually costs about 1% of the total property value.