What is Title Insurance?

Many buyers don’t understand title insurance as well as they do car insurance, homeowners insurance, or health insurance. After all, you don’t buy title insurance every day. Title insurance premium is a one-time fee typically paid at the closing of your home purchase. However, it may be just as important as other kinds of insurance.*

Are you buying a home? Actually, you are purchasing title to the property. This means that you are buying the right to use and occupy the space. This title may not be free of interests of others. The title might be limited by the rights and claims of others, restricting the use and enjoyment of the property. This can mean huge financial loss.

Title insurance is designed to protect real estate owners against these kinds of dangers. The policy coverage lasts as long as you or your heirs have interest in the property.

What Do You Get When You Purchase Title Insurance?

Prior to closing, your title company does everything possible to detect title defects to protect against claims and losses. Public records are searched for all documents affecting your property. Defective documents that don’t clearly transfer title are sometimes found in the history or “chain” of ownership. The title examiner will report all discovered “material objections” to the title.

Examples of title defects or hazards include:

• Deeds, Trusts, and Wills that were prepared incorrectly, perhaps including improper words or incorrect names
• Defective notary acknowledgements
• Pending legal action against the property
• Easements that will allow construction of utilities, roads, or public improvements

Title insurance offers protection against these defects. Title insurance will pay for legal expenses incurred in defending your interest, and will perfect the title. If it cannot perfect the title, it will pay for valid claims.

Mechanics liens are typically not covered by title insurance policies. You would need additional endorsement. This may be something to discuss further with your title insurance agent, especially if you are purchasing new construction.

*Because I am not a licensed insurance agent, I cannot tell you to buy title insurance or require you to use a specific title company. Discuss title insurance with a title agent fully before making a decision about purchasing a policy. This post is for informational purposes only.

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