Buying a house is one of the most important decisions in life. Apart from the property’s price tag, the decision of purchasing property also requires other financial and lifestyle considerations. However, when it comes to title insurance, people often underestimate the concept and neglect it. While it involves a one-time hefty expense, it provides unquestionable sentiment comfort to the buyer in the long term. Here is all that you need to know about title insurance.
What is Title Insurance?
Title insurance is a type of insurance that protects the property holder against the errors in the ownership records of the property. In other words, it will protect the holder from any financial downfall triggered by ownership issues.
How does it work?
Title insurance protects both the real estate owner and lender, who financed the mortgage against any loss due to liens or defects in the ownership document. It covers:
- The claim of ownership by another party
- Recordation defects
- Outstanding lawsuits against the property
- Unrecorded easements
Every insurance company rundowns a title search for the property insured to check for any claims on the property. This procedure involves examining public records that confirm the property’s legal ownership.
Why do you need it?
Title insurance can help the owners for as long as they have an interest in the property. The risk of not having title insurance can be huge. Without the title insurance, the financial burden of any unpaid taxes, lawsuit, or any other irregularities arising out of property acquisition will solely fall on the owner. You may even end up losing the property. Purchasing a title insurance policy requires a one-time premium payment only.
Types of Title Insurance
The mortgage process mandates purchasing title insurance policy. All lenders require the property buyer to buy the title insurance to eliminate the risk of any illegal title transfer. A lender’s policy only covers the amount of loan taken and remains effective until the repayment, sale, or refinancing of the property. This policy implies completion of the title search and thus offers assurance to some extent to the buyer.
However, title searches are not always error-free. Though owner title insurance is optional, it covers a wide range of title associated risks. You need not worry about any future problems arising due to past occurrences like deed errors or omissions, forgery of documents, or any unknown heirs showing up to claim the property. A clear title is necessary for real estate transactions. The decision to buy title insurance depends on the information you have on the title of the property. Overlooking a little information might eventually haunt you in the future. Buyers must ensure that the property has a good title before closing the deal. They must consider purchasing owner’s title insurance to protect themselves from any unforeseen future claims and potential loss of their valuable asset.