What is Title Insurance?

When you take out a mortgage to buy a home, one of your closing costs will be title insurance. When you buy a home, you want to ensure your property has a clear title that's free from liens and other ownership claims. Purchasing title insurance for your home protects you and your heirs from any challenge to your title and any unforeseen legal claims.

There are two types of title insurance: lender's title insurance and owner's title insurance. Lender’s title insurance protects the lenders interest in the property in the event of a third-party claim. Purchasing a Lender’s title policy is typically required to get a mortgage loan.

Owner's title insurance protects the buyer’s equity in the property. If you do not have owner's title insurance, you may find yourself financially liable for any defects with the property's title that pop up down the road. A title claim can arise at any time, even after you've owned and lived on the property for years. The most common lawsuits filed against the title include back taxes, liens, and conflicting wills. An owner’s title insurance policy covers any defects or problems that may occur when the title changes hands.

Even with an extensive title search of the property by a professional title company that will find hidden title problems, this is not a guarantee that undiscovered issues or claims may not arise in the future. Here are some of the issues an owner’s title policy can protect you against:

1. Forged title deeds and forged transfers of ownership rights on the property
2. Undisclosed liens for any unpaid remodeling or construction work on the property or taxing entities
3. A previous owner who uses the property as collateral
4. Building code violations by previous owner
5.  Unintentional errors in the recording or filing of documents
6. Conflicting wills and claims related to a forged power of attorney
7. Boundary disputes
8. Encroachment on property survey errors
9. Claims from an ex-spouse whose approval is missing from the sale of the property
10. Any other title defects that existed prior to the start of your policy.

Simply put, homeowner’s title insurance is a small price worth paying to protect you and your investment.