What is Title Insurance?

by Gillian Markson | More from this Blogger

16 Jun 2006 06:46 AM

When purchasing a home, title insurance is extremely important. Even so, we still see a large number of homeowners that have no idea what it is or the protection it offers. First, there are two types of title insurance, which includes the lenders title insurance, also known as the Loan Policy. This type of title insurance is based on the amount of the mortgage loan. With this, the lender's interests are protected just in case there is a problem with the title. In addition, the lender's title insurance will decrease annually, eventually disappearing as the mortgage is paid for.

The second type of title insurance is the homeowner's title insurance, which is issued on the amount of the real estate purchase. This type of insurance would be purchased as a one-time fee during closing, which would then last as long as you or any heirs would have interest in the home. In fact, the homeowner's title insurance could even cover the home after it sells. In this case, the insurance is designed to protect the homebuyer just in case some type of problem comes up regarding the title that was not covered during the initial title search. With this, any legal fees involved for defending your claim on the title would be covered.

Keep in mind that the type of title insurance issued and the price of the insurance will vary from one state to another. Therefore, you should contact a title company where you live to determine the requirements and prices. Once you find the company you want to work with, they will search the public land records for any matters pertaining to the desired property. Interestingly, sometimes the search will go back as far as 50 years.

In about 25% of searches, a problem with the title will be uncovered, which allows time for the problem to be resolved prior to the purchase of the home. However, even after completing an exhaustive search, certain things are uncovered. This might include mistakes in the public records, forged deeds, undisclosed heirs, and so on. In other words, the title insurance provides financial protection just in case something should be uncovered.

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