Title insurance is a type of insurance that protects homeowners and lenders from financial losses caused by defects in the title to a property. A title defect is a legal claim to a property that is not reflected in the public record. Title defects can arise from a variety of sources, such as:
- Forged deeds
- Errors in property surveys
- Unpaid liens or taxes
- Claims by heirs or ex-spouses
- Easements or other encumbrances that are not properly recorded
Title insurance can help to protect you from these and other title risks. If a title defect is discovered after you purchase a property, your title insurance policy will cover the cost of defending your title or curing the defect.
Types of Title Insurance
There are two main types of title insurance:
- Lender’s title insurance: This type of insurance protects the lender from financial losses if a title defect is discovered after the property is purchased. Lender’s title insurance is typically required by all lenders as a condition of financing.
- Owner’s title insurance: This type of insurance protects the homeowner from financial losses if a title defect is discovered after the property is purchased. Owner’s title insurance is not required by law, but it is highly recommended for all homeowners.
Why You Need Title Insurance
Even if you have a thorough title search conducted before you purchase a property, there is still a risk of title defects. Title defects can be very costly to resolve, and in some cases, they can even result in the loss of your property. Title insurance can help to protect you from these financial losses.
Here are some examples of how title insurance can help:
- If you purchase a property that has an unpaid lien on it, the title insurance company will pay the lien off so that you can keep your property.
- If you purchase a property that has an easement that is not properly recorded, the title insurance company will negotiate with the easement holder to try to remove the easement or reduce its scope.
- If you purchase a property that has a forged deed, the title insurance company will help you to defend your title to the property.
How to Get Title Insurance
Title insurance can be purchased through a title company. Title companies specialize in conducting title searches and issuing title insurance policies. To purchase title insurance, you will need to provide the title company with the following information:
- The address of the property you are purchasing
- The names of the buyers and sellers
- The purchase price of the property
- The financing information (if applicable)
The title company will then conduct a title search to identify any potential title defects. If any title defects are found, the title company will work with you and the seller to resolve them before the closing.
Conclusion
Title insurance is an important part of the home buying process. It can help to protect you from financial losses caused by title defects. If you are purchasing a property, be sure to purchase title insurance to protect your investment.