Understanding Title Insurance
Learn what it is and how it can protect your clients in their homeownership journey.
Insurance of all kinds helps protect us from the unexpected and unforeseen. Title Insurance is no exception. No matter how thorough your title search is, unforeseen ownership claims can arise at any time during your buying, selling, or homeownership journey. Having title insurance is one of the most important steps you can take to protect yourself when these situations arise.
What is Title Insurance?
Title Insurance is a policy that protects home buyers and their lenders against third-party claims on a property that may not appear during the initial title search but can arise after a real estate closing. A third party could be anyone other than the property owner, such as a construction company that didn’t receive payment for work done under a previous owner or a taxing authority who didn’t receive payment for years past.
Title insurance is a one-time closing cost paid at settlement.
Types of Title Insurance
- Lender’s Insurance
If you’re getting a mortgage to purchase a home, the lender will require you purchase a title policy protecting them. This protects the lender in case third-party ownership claims arise with the property title during the loan repayment period. Importantly, lender’s title insurance does not protect your investment in the home. A lender’s title insurance policy is required when the home purchase is financed.
- Owner’s Insurance
This directly safeguards your investment in the property. No matter if you’re financing your new home or paying with cash, owner’s title insurance protects the new owner against third party claims on the property. The cost is a one-time premium paid at settlement, and the policy remains in effect for as long as you own the property. This is the only coverage for the buyer should a title problem arise. While owner’s title insurance is optional, it is highly recommended for homebuyers.
**On the closing disclosure or loan estimate, the Owner’s Title Policy is labeled “optional.” However, “optional” should not be mistaken for unnecessary. Without this important coverage, hidden risks can seriously impact a buyer’s investment. **
