According to Zillow, the median value of US homes has risen by 4.7% during the past 12 months. A further 3.4% increase is projected for the next year.
Along with property values, allied industries like title insurance are also on the rise. Title insurance is now worth $15 billion and is forecasted to grow in the future.The numbers clearly show that homeowners are investing in title insurance.
But what is title insurance? Is title insurance necessary? Most importantly, what does it mean for you? Here is what you need to know!
What Is Title Insurance?
Conventional insurance policies safeguard policyholders against adverse future events. For example, auto insurance protects the insured against the financial impact of auto accidents and thefts. Title insurance, on the other hand, protects policyholders from past events. This attribute makes it very different.
Title Insurance Protection
There are two broad categories of title insurance. Both lenders and homeowners can purchase title insurance if they so desire.
Homeowners can benefit from title insurance because it covers their property investment. Lenders benefit from title insurance because it covers their security amount in the property. Title insurance makes an intensive search to uncover any potential liabilities that the property title may incur. In other words, if you face lawsuits after becoming the titleholder of the property, title insurance will move in to defend you against any challenges to the legality and validity of your title.
Is Title Insurance Necessary?
The short answer is definitely yes.
Title insurance can pinpoint possible legal challenges and lawsuits that you would probably not have been able to uncover on your own.
Imagine that you lose the entire property due to a lawsuit. What a staggering loss that would be! Hence, you should not hesitate to pay this nominal amount. It will protect you against the threat of a tremendous loss that can bring down a lifetime of hard work to zilch. The title insurance premium stands at just a tiny fraction of the immense cost of your property. This is a tiny price to pay to safeguard against a terrible loss.
One criticism leveled against title insurance is that it only pays out a small amount of the premium. There is a good reason for this. The reality is that title insurance makes an extremely extensive, exhaustive and comprehensive search before insuring a given property. Therefore, it is highly unlikely that you will ever run into any legal issues associated with the property in question.
If anything, the low payouts show the safety, efficiency, and success that homeowners can enjoy with title insurance. And no, profit margins for title insurance are not as high as many homeowners imagine. The extensive research ties up a lot of resources and money.
Cost of Title Insurance
Title insurance is very cost-effective since you are making a rather nominal one-time payment, as opposed to conventional insurance where you have to make monthly payments for the entire duration of the policy. For homeowners, it can cost about $830 on average, while for lenders title insurance can be as little as $540. The amount will vary according to the value of the property in question.