Title Insurance

Explaining Title Insurance

Most people understand what a title is. It’s a claim to ownership. Owning your own home means you have rights to the property and you can modify it as you see fit.

What is a Title?

A title is a document given to the owner of a house. It shows the property legally belongs to the owner and there are no outstanding claims or liens on it or any fraud or error in the history of the ownership. It also shows any non-ownership rights, like easements for example. Common easements are those put in place for utilities (company access) or driveways (neighbor access).   

What is Title Insurance?

Title insurance comes with the title of the house. It is a way to protect yourself from financial loss and related expenses if there is a defect in the title that is covered by the policy.

Title insurance differs from other types of insurance in that there are no monthly payments required. There is just a one time premium that’s paid at closing.

There are several ways title insurance can help you.

For one, if work is done on the house and the homeowner refuses to pay the contractor and then sells the home, the new owner may now be liable to pay for the work. However, if the new owner has the title insurance to prove they now own the house, the contractor will be unable to come after them for the debt.

Title insurance also proves you own the home no matter what. Some sellers are not entirely honest and may try to sell the property to someone else even after it has been sold to you. When someone comes to the door with a deed saying they own your home, you will have no recourse, unless you have the insurance to back it up.

Or say you buy a home whose last owner is now deceased. You think all is well and good so you don’t bother with title insurance. Then you find out that the deceased actually left the home to a relative and they would like to claim it. You will have trouble holding on to the home unless you have the insurance.

Different Types of Policies

There are two different types of title insurance policies and it’s a good idea to know the difference between them. Real estate agents can even get confused so knowing the difference as a homeowner can help things run more smoothly.

One type of title insurance is a lender’s policy. This policy only covers mortgage lenders from unforeseen liens, defects and frauds. It does not cover homeowners.

The owner’s policy is the one that will protect the buyer if an issue occurs.

The seller or buyer will pick which insurance company they use depending on who pays for the policy.

Title insurance is not necessary but paying this one time fee can go a long way when it comes to protecting your property rights.