Understanding Title Insurance: The Main Points
Buying a home is a process and requires several steps and expenses beyond the actual purchase. Unfortunately, few understand the process and its nuisances. For example, title insurance is a crucial piece of the home purchase puzzle that many don't fully grasp. Below are a few things you should know about title insurance.
Differs from Property Insurance
Title insurance is not property or homeowners' insurance—in fact, the two couldn't be more different. Property insurance protects property owners from losses related to property damage, theft, and liability claims related to their properties. Title insurance protects property owners and mortgage lenders against losses or disputes related to property ownership or titles.
Comes in Two Types
Insurance companies offer two types of title insurance.
Lender
If you buy a home on a mortgage, your mortgage provider gains a financial state on the property. The lender might lose money if you lose the property or it loses value due to an ownership complication. The lender's title insurance protects the lender's interest in the property. As such, lender's title insurance is mandatory.
Homeowner
When you buy a property, you may buy title insurance to protect your interests from legal tussles that might arise due to the property's legal ownership. The coverage is optional but highly advisable.
Has a Wide Coverage
Title insurance protects you from a wide variety of losses. Below are a few examples.
Liens
Liens are third-party claims against the property. For example, a financial institution might place a lien on a property if the owner uses it to secure a loan. Title insurance can protect you from losses you would otherwise incur if you discover a lien after buying a home.
Fraud
Title insurance can also protect you from fraudulent issues you might discover after buying a home. Say the seller lied about the property's boundary and forged the title documents. Title insurance may protect you from related losses when you lose a portion of the property after discovering its true boundary.
Public Record Errors
Title complications are not always intentional. For example, errors in public property records can affect your property rights. Again, title insurance can shield you from losses arising from such errors.
Undisclosed Heirs
A property title should show everyone with a claim to the property. For example, if someone bequeathed a home to multiple heirs, all of them should consent to the property sale. If not, the title history should reveal how other heirs relinquished their claim on the property. Otherwise, you might lose the property if you don't have title insurance.
In any of these cases, title insurance may pay for your legal defense, financial losses, or compensation for third parties your title issues might harm. Talk to your insurance company for coverage clarification.
Attracts a One-time Premium
Many forms of insurance attract periodic premium payments. For example, you may pay premiums monthly, quarterly, semi-annually, or annually. Title insurance is different because you pay the premium once—upfront. Once you make the payment, the coverage is valid as long as you own the home once you make the payment.
The premium rate depends on:
- The property's location
- The insurance company
- The property's value
- The type of property
Shop for title insurance just as you would for other things or professionals like real estate agents or contractors.
Regulated At the State Level
Lastly, you should know that the state government regulates title insurance. Therefore, do not assume your knowledge of title insurance when you move or buy property in another state. For example, some states tightly regulate title insurance rates. Talk to a local real estate professional to help you navigate title insurance issues.
Homeland Title Settlement Agency, LLC. has incredible experience in the real estate industry. You can rely on our expertise to protect your investment, whether you are a property buyer or lender. Contact us today for quotes on our professional services.
