Title Insurance

Title insurance is a form of indemnity insurance that protects lenders and homebuyers from financial loss sustained from defects in a title to a property. The most common type of title insurance is lender's title insurance, which the borrower purchases to protect the lender. Owners' title insurance is also available and provides protection to the buyer of the property.

What is Title Insurance?

Title insurance is designed to cover both known and unknown title issues that could affect your rights to a property. It provides protection against past events that may have happened with the property's ownership history rather than issues that arise in the future. This makes it distinct from other types of insurance products that provide coverage for future events.

How is Title Insurance Calculated?

The cost of title insurance is typically a one-time fee based on the value of the property. The calculation formula generally involves rates that are set by the state, plus the size and overall price of the property. As a one-time premium, it's paid at the closing of the real estate transaction.

Example of Title Insurance:

Imagine purchasing a new home and later discovering there is an outstanding lien from a previous owner’s unpaid taxes. With title insurance, the insurance company would manage disputes like this and, if necessary, pay for legal costs and losses incurred up to the coverage limit.

The Importance of Title Insurance

1. Protection Against Claims: Title insurance protects against claims from previous owners. It covers court costs and legal fees involved in defending your property’s title.
2. Fraud Protection: It helps protect against instances of fraud where someone attempts to forge documents to claim ownership of your property.
3. Risk Mitigation: Title insurance provides financial restitution if a serious defect is found, allowing peace of mind when purchasing property.
4. No Annual Premiums: Unlike other forms of insurance, you pay for title insurance only once at the closing of your transaction.

Investing in title insurance is crucial for any property transaction as it ensures that the property title is clear of any unseen claims and liabilities that could jeopardize your investment.