Why you should be discussing title insurance

When buying a home, you come across a lot of terminology and you may not know what all of it means for you as a homeowner. Title insurance can be one of those terms that you may not be familiar with, but it is in your best interest to know why having a title insurance policy can save you from potential legal actions and financial loss.

Made to protect lenders and owners of real estate against damage or any property loss they may encounter from liens, defects in the title, or impediments, title insurance policies are subject to various terms and conditions from state to state.

While the insurance policy you carry on your car or even your health is there to protect you in case of any future problems, title insurance is much different. Title insurance is in place to safeguard against any actions that transpired previously, with the real estate itself or the prior owners. You will pay a one-time premium at the close of escrow and the policy will cover you as well as your heirs, as long as you have interest in the property.

What else do I need to know about title insurance?

There are two types of title insurance policies, one for lenders, and one for the buyer of the property. While all mortgage providers require a lender policy, it does not cover the owner of the property. You must purchase your owner's policy independently.

After your contract for purchase is accepted, the specialist handling the titling of your home will do a search of public records to try to locate any problems with the home's title. It is common since almost one-third of title searches produce some kind of defect in the title but the title company will do its best to handle any issues that may arise before you go to closing.

Title issues can come up, even with the most thorough searches of the property. A title insurance policy will protect you against unforeseen events that may take place after you have taken ownership of the home. Having an owner's policy is highly recommended to keep your biggest investment safe.

Types of title defects

  1. Fraud and forgery can cause trouble for anyone purchasing a home. The perpetrators involved in real estate scams are cunning and tenacious, and they can cause difficulties that can remain concealed until long after closing, no matter how precautious the title company is.
  2. A missing heir can cause issues long after you have acquired the property if they are related to the deceased homeowner. Your rights to the home could be compromised, but an owner's policy ensures that you will have representation if litigation were to ensue.
  3. An illegal deed may affect the ability to enforce prior deeds and ownership, as well as present-day possession. Your policy may help if deception has been found in the handling of the title.

The only way that you can ensure being fully protected as a homeowner is to have an owner's policy that covers any problems with the title that were not found during the initial records search. You will have peace of mind that your title company will stand behind you, if you have to deal with any unanticipated problems. You will need to check with your owner's policy issuer to see what types of hidden title issues are covered.