At some point during your home-buying process, the topic of title insurance is likely to come up. As with most types of insurance, title insurance is better to have and not use than to be needed and unavailable. But what is it, why do you need it and how does it work?
Title insurance is a specialized insurance policy that protects you and your mortgage lender against mistakes made in a title search. If you find a home and there’s not a clear title to it, title insurance protects the bank, and you, if there’s a problem. A clear title means you’ll be able to occupy and use the property the way you want, and that you’re able to sell or pledge your property as security for a loan.
There are generally two types of title insurance: lender’s and owner’s title insurance. The lender’s policy is usually based on the dollar amount of your loan and protects the lender’s interests in the property against a problem with the title. The policy coverage decreases each year and goes away as the loan is paid off.
As its name suggests, the homeowner buys owner’s title insurance, which is in the amount of the real estate purchase, for a one-time fee at closing. It lasts as long as you own or have an interest in the property. Owner’s title insurance fully protects the homeowner in the event that there’s problem with the title that wasn’t discovered during the title search. This type of insurance also pays for any legal fees involved in defending a claim to your title. Think of owner’s title insurance as helping to protect your equity, or your investment, in a home.
Title insurance is a safeguard against loss arising from hazards and defects already existing in the title. While claims on title insurance are rare compared to other types of insurance, they still happen and can be complicated legal issues to fix. For example, one of the most common title-insurance claims is for the cost of back property taxes that the title company missed in researching a sale. Another example is when there’s not a clear title to the house, especially in cases of divorce. These scenarios might sound minor, but they can cost thousands in fees without title insurance.
This article was written by Danny Frank of Coldwell Banker United Realtors. This information is provided for educational and information purposes only.
Real Estate transactions can sometime be overwhelming. At Hubbard Law Firm, we offer a wide variety of commercial and residential real estate law counsel. Our office can help facilitate a successful completion of your real estate project or development and help you achieve your real estate goals. If you have questions about a residential or commercial lease please contact our office at 281-358-7035 or visit our website at www.hubbardlawgroup.com
