Title Insurance Explained: The Hidden Protection When Buying Property
**Title Insurance** is a unique form of insurance purchased during a real estate closing. Unlike other insurance types that protect against future events, title insurance protects against financial loss from defects in the property’s title that occurred in the past. It guarantees that the seller has the legal right to transfer ownership to you.
The Purpose of the Title Search
Before issuing the policy, the title company conducts a detailed **title search** to examine public records, looking for potential “clouds” on the title, such as:
- Unpaid mortgages or taxes (liens).
- Undocumented heirs who could claim ownership.
- Errors in public records or previous property deeds.
- Forged documents or fraud.
Two Types of Title Insurance Policies
Both the lender and the buyer typically purchase separate policies:
- Lender’s Title Policy: Protects the mortgage lender against defects in the title. This is required by virtually all lenders and covers the amount of the mortgage.
- Owner’s Title Policy: Protects the homebuyer’s equity. This is optional but highly recommended and covers the full purchase price of the home.
Single Premium: A key feature of **Title Insurance** is that it is purchased with a single, one-time premium paid at closing, and the coverage lasts as long as you or your heirs own the property.
**Title Insurance** provides crucial peace of mind, protecting your largest investment from hidden legal liabilities rooted in the property’s history.