Title Insurance
Choosing to buy a home is a big step. It requires a significant amount of time, thought, and financial commitment. For many, it's one of the most important financial decisions they'll ever face. Title insurance companies provide vital information to buyers and lenders regarding the property they are purchasing or financing. You may wonder what it is and why it's included in the costs.
What Is Title Insurance and Why Do I Need It?
Title insurance is a fee listed on your closing documents when you buy or sell real estate. While it may seem like unnecessary insurance, title insurance plays an important role. Unlike other coverages that protect you from future risks, title insurance offers peace of mind by shielding you from issues related to past problems. You may be lucky if you never need to use it; however, if you do, you’ll be glad you have it.
There are two types of title insurance policies: owner’s and lenders. A loan policy is required by the lender when you take out a mortgage, and the seller provides the owner’s policy to ensure the buyer receives a free and clear title to the property, as outlined in the offer to purchase. The loan policy gives the lender a free and clear title to the property. Additionally, title insurance is a one-time paid premium, unlike annual premiums for other types of casualty insurance. Most importantly, an owner’s policy offers this coverage for as long as you own your home.
A title defect refers to an issue that could threaten the current owner’s full right or claim to sell a property. Such defects include liens, mortgages, judgments, unpaid taxes, easements, or other encumbrances from previous ownership or inheritance. These defects can hinder the sale process and lead to legal and financial challenges for both buyers and sellers.
If you don’t have title insurance, you could be responsible for thousands of dollars in legal fees or expenses caused by defects. For example, if a recorded unpaid lien from years ago surfaces when you own the property, your title insurance would cover the cost, rather than you having to pay it out of pocket, even if it had nothing to do with you. Since liens, judgments, and ownership claims attach to the property, not the owner, you can be held responsible for issues you had no part in but are now your problem because you own the property. Title insurance covers the costs of resolving issues and any legal disputes that may arise, as covered under the policy, for as long as you own the property.
Brabazon Title Team Group is an issuing agent for Chicago Title Insurance Company and First American Title Insurance Company.
Here are some resources to help guide you through the title insurance process.
