What is Title Insurance and Why Do I Need It?
What is Title Insurance?
Title insurance is a type of protection for homeowners and lenders against financial loss due to defects in a property’s title. The title of a property represents legal ownership, and before a home is sold, a title search is conducted to ensure there are no outstanding claims, liens, or legal issues associated with the property. However, undiscovered title defects can sometimes arise even after a thorough search, which is where title insurance comes in.
Why Do You Need Title Insurance?
- Protects Against Ownership Disputes
- If someone else claims they have a legal right to your property due to a past owner’s mistake or fraud, title insurance helps cover legal costs and protects your ownership.
- Covers Undiscovered Liens and Encumbrances
- Sometimes, unpaid debts such as tax liens, contractor liens, or unpaid mortgages can surface after you purchase the property. Title insurance ensures you are not held responsible for these past debts.
- Defends Against Errors in Public Records
- Clerical errors, mistakes in legal descriptions, or fraudulent activity in past transactions can create title issues that are only discovered later. Title insurance corrects these issues and covers legal expenses.
- Required by Mortgage Lenders
- If you are taking out a mortgage, most lenders require lender’s title insurance to protect their investment in case title issues arise. While lender’s insurance covers the bank, a separate owner’s title insurance policy protects you, the homeowner.
- One-Time Cost for Lifetime Protection
- Unlike other types of insurance, title insurance is a one-time payment at closing that provides coverage for as long as you own your home.
Types of Title Insurance
- Owner’s Title Insurance (Protects the homeowner from title defects)
- Lender’s Title Insurance (Protects the mortgage lender from title-related financial losses)
Title insurance is an essential safeguard that protects your homeownership from unforeseen title defects, legal disputes, and financial liabilities. Whether required by a lender or purchased voluntarily, having title insurance gives you peace of mind knowing your property rights are secure.