When you purchase a new home, it likely represents the largest investment you will make in your lifetime. You consequently need to know that you have legal title, i.e., legal ownership, of your home and the property on which it sits. Title insurance gives you this peace of mind.
Forbes explains that title insurance policies come in two kinds: owner policies and lender policies. As their names imply, an owner’s policy protects you against defects in your title, while a lender’s policy protects your mortgage holder. In all likelihood, your lender will require a lender’s title insurance policy before giving you a mortgage loan. Generally, you choose to purchase an owner’s title insurance policy
Unlike most insurance policies, such as your life insurance, auto insurance, homeowner’s insurance, etc., that protect you against future occurrences, title insurance protects you against defects in your home’s title that occurred in the past. Your title insurance company will conduct an extensive title search of your property that should bring to light any of the following:
- Errors in the public records
- Undiscovered encumbrances
- Undiscovered easements
- Undiscovered liens
- Undiscovered wills of former owners
- Missing heirs of previous owners
The title search likewise should discover any boundary and/or survey disputes that occurred in the past, plus assure that all previous owners had the legal capacity and right to sell the property.
Title insurance protections
Once you purchase your title insurance policy, the company defends you against any claims anyone makes against your title for as long as you own your home. Given that you pay only a one-time title insurance premium, the amount of which likely will be less than $800, title insurance represents a wise investment.
Commercial real estate
Title insurance is also a very important component of commercial real estate transactions. Title insurers offer a wide variety of additional coverages beyond the basic policy that can significantly reduce the risks of acquisition for the buyer. Exploration of what additional coverages are available is a regular part of the “due diligence” process engaged in by knowledgeable buyers.