Real Estate Pro Tip Series: What is a Title Insurance Policy?
Updated: Oct 23, 2022
When a home is purchased, a deed is provided to the new owners that shows the transferring of the legal ownership from one person to the next. Title Policy is an insurance that protects the homeowner and/or lender from legal issues involving ownership of the property. These issues can come from people who say they have a claim against the home or from human error in the title process. In the event of a dispute, Title Insurance Policy covers any legal fees to resolve the issues & protects the homeowner and/or lender from liability.
What does Title Insurance Policy Cover?
With a Title Insurance Policy, the legal issues covered by your plan will vary depending on the policy & the provider. Common risks covered by a Title Insurance Policy are:
The risk that someone else owns your property or makes a claim against your property.
Defects or Encumbrances on your title caused by fraud or forgery
Recording mistakes like incorrect signatures or mismarks
Any liens for Real Estate Taxes or assessments that are due but unpaid
Your title being unmarketable (unable to sell to a purchaser due to a title defect)
Right of Access to and from your land as well as undocumented easements
Building permit violations from previous owners
Variety of encroachments
Unknown heirs to an estate and/or conflicting wills
Most lenders will require you to purchase the Lender’s Title Insurance, which protects the amount that they lend. Homeowners can additionally purchase Ownership Title Insurance which protects them from the liability & legal fees of a dispute over ownership of the property. If a lender doesn’t require Title Insurance or you’re buying a home in cash, the buyer can request a Warranty of Title which states the seller is the sole party who can legally sell the home. A Title Insurance Policy or Warranty of Title can protect the lender and/or owner from liability & legal fees.
Shopping for Title Insurance
With Title Insurance, the homeowner often can shop for a policy separately from their mortgage. A buyer usually can save money by combining the required lender policy with the owner’s policy (if purchased). Title Insurance Policy costs typically range between $500 & $3,500 per policy. The important factors in the cost of a policy include the property location & purchase price, the extent of the coverage, & the provider. Title Insurance Policies are typically a one-time premium that is paid at closing & may include transaction fees.
Work with a Title Expert
When considering your options for a Title Insurance Policy, it is always recommended to consult a trusted Title expert to guide you through your options. Although a Lender Title Policy is typically required, buyers will often have the choice to purchase an Owner’s Title Policy. These policies will vary in costs depending on the home purchase & the policy itself.
Feel free to reach out with any questions or comments!
Title Insurance Sources:
The Balance: What is a Title Insurance Policy
Consumer Finance: What is Owners Title Insurance
Home Closing 101: Parts of a Title Policy
Zillow.com: Home Buying Guide - What is Title Insurance?
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