5 Questions About Title Insurance

December 1, 2015

Purchasing a home is one of the biggest investments you’ll make in your lifetime, and it makes sense to protect your investment to the fullest extent. Homeowners insurance protects the physical structure of your home. Warranties protect your belongings. However, neither of these protects your property rights. The only way to ensure total protection of every aspect of your home is through title insurance.

What is Title Insurance?

Title insurance is an insurance policy that protects the owner of a home or piece of property against any unforeseen title discrepancies.

How does it work?

When a piece of property is financed, purchased, or sold, a record of that transaction is often filed in the public archives. At the same time, other events that could affect the ownership of a piece of property are also documented. These can include liens, levies, and encumbrances.

When you purchase title insurance, the title company will do an initial investigation and search every available record to find (and potentially remedy) any issues that could affect the purchaser’s ownership. From there, the underwriter will determine the insurability of the title and list exceptions from coverage and requirements to insure.

However, there are some issues that are difficult to identify. These include: filing errors, forgeries, or undisclosed heirs. Should these issues come to light, title insurance will cover the costs of any legal expenses needed to investigate or settle a claim.

What happens if I don’t get Title Insurance?

Without title insurance, you could be subject to unwanted litigation, obligations, debts, or other costs. At worst, you could lose your property.

More often than not, an initial title examination will uncover any potential problems. However, due to what you stand to lose, proceeding without title insurance simply isn’t worth the risk.

What Does Title Insurance Cost?

The cost of your insurance will vary by the property and the level of protection you wish to purchase, but it typically costs around 0.5% of the home’s purchase price. However, unlike health or car insurance, you only pay once. After the initial payment, your coverage will continue as long as you own covered property. The coverage will also continue for your heirs in the event of your death.

How do I purchase Title Insurance?

When you secure a mortgage, your lender will require you to purchase a loan policy of title insurance, which insures the lender against any title defects. However, you also have the option to buy an owner’s policy, which applies insurance directly to you (or the owner listed on the property).