What is Title Insurance?

We all know that insurance is meant to protect us and our possessions, but what exactly does that entail? Unless you’re from a royal family, you probably don’t have a title like Lord or Duchess to protect. Title insurance in today’s world protects you from any potential issues or claims on your home or property.   

When you purchase a property, you are making a claim on that property’s title. Some potential legal issues that can be tied to the title of a property are: undisclosed heirs, fraud, tax issues, or legal disputes, among other things. Having title insurance for your property means that you are protected from paying for fixing these issues if they come up, and guarantees that you own the property and its title.  

Types of Title Insurance 

There are two types of title insurance policies: owner policies and lender policies. Basically, one protects you and one protects the person who gave you your mortgage.  

A lender policy does not protect the buyer of the policy, but rather is insurance for the company who issued the loan for a mortgage. Lenders require buyers to purchase a lender policy to protect the loan they gave you, in case of any issues that might arise with the title of the property. If you purchase a loan policy, the amount of the policy will decrease as the mortgage is gradually paid off. An owner policy on the other hand, is not required but a good idea, because it protects you-the buyer. If any issues arise related to the title on your property after it is purchased, then your policy insures that your title company will aid and protect your investment. Both should be discussed by all parties before a real estate closing.

How Much and Who Pays? 

The price of title insurance and the rule of who chooses it varies between states and even counties within a state, but if you are paying for the title insurance you have the right to choose the company. This is why local market knowledge is so essential. Lender policies can cost anywhere from $500-$1500, while owner policies are usually slightly more expensive. There are a number of local title insurance companies you can choose from, as well as nationally recognized companies such as Fidelity National and Old Republic. Don’t just settle for whatever company the buyer or seller might suggest. Make sure to do your research before making any purchases, talk to your real estate agent and lender, and remember the importance of insuring your title.