You just purchased a house. Ever wonder what would happen if the previous owner comes and claims to still own the house?
This might seem unlikely to you, but it happens a lot. And, that’s where title insurance comes into play.
What Is Title Insurance?
As the name suggests, title insurance is the insurance on the title of your property. It is a form of indemnity insurance that keeps the owner of a property safe from the financial loss they may have to bear in case there are defects in the title of the property. Title insurance is usually purchased when you go and get a mortgage. This policy covers either a mortgage lender or a homeowner, but you will usually have to pay for both types when it comes to the closing costs.
It is important to get title insurance on your property as the recorder of deeds in the U.S. doesn’t guarantee accuracy when it comes to their records. This means that someone with an older document can come forward and claim the property to be theirs, especially if there is any evidence of past forgery or fraud. With title insurance, your title rights for a property are perfected. It also offers compensation in case you lose the property.
Title insurance is of two types:
- Lender’s policy
- Owner’s policy
The lender’s policy protects the interests of a lender in a property if the title of the property is not covered. This helps the lenders stay safe in case someone comes later and claims to be the real owner of the property. Lender’s policy is to be taken care of by the buyer. Thus, when it comes to the lender’s policy, the buyer typically pays for it.
The second type of title insurance is the owner’s policy. It is a type of insurance that protects a homeowner against any defects in the title that were not found during the initial search. You just have to pay this cost once, during the closing of the deed. The owner’s policy not only covers the owners but also their heirs for as long as they have an interest in the particular property.
Many different title issues may arise when you purchase a property. Some of them include:
- Undisclosed heirs
- Record examining errors
- Errors and omissions in the final deed
The owner’s policy covers property owners against all the issues. The owner’s policy can be paid either by the seller or the buyer of the property. Take a look at who traditionally pays for this policy in your location and decide accordingly.
Should I Get Title Insurance?
If you are purchasing a property, then it is best to get title insurance. This will save you from title-related issues later on, which can even cost you the property you just purchased. With title insurance, you can rest assured that your property is safe and you will be compensated for the damages, even if some problems arise later on.