Understanding Title Insurance

Buying a house? Title insurance is an important, often overlooked, part of the home-buying process. It is true that title insurance can be costly. However, this is a situation where an ounce of prevention is truly worth a pound (or more) of cure. A title insurance policy can cost a few hundred dollars, but, if there turns out to be a problem, correcting it on your own could cost tens of thousands of dollars. Unlike other types of insurance policy, this is a one-time fee, rather than a monthly or annual expense.

What is title insurance? Essentially, it is a policy that guarantees that there are no problems with the title to the property you are buying. Before issuing the policy, the title company will go to the county recorder’s office, pull all of the property records for the property you are buying, and verify that the person selling the property to you is the true owner. This is not as simple as pulling a copy of the current deed. The title company will often go back decades, to ensure that there will not be any problems with your sale. They will verify whether there are any liens on the property, easements, or other claims that could interfere with your ownership. If they find a problem, they will resolve it for you prior to the closing. If they do not find any issues, or after the issues are resolved, the insurance company issues a policy. The policy guarantees that there are no problems with the title, and that the new owner can take title to the property at the closing, free and clear. The policy protects the homeowner from any mistakes that may have been made in the title search, and any problems that may arise after the fact.

A title insurance policy protects against a number of problems that could arise down the road. Common examples are a will that was never probated, meaning that an heir may step forward to claim an interest in the property. There could be a mistake in a deed or information that was omitted. It is possible that the title examiner made a mistake, or that a deed was placed incorrectly due to a clerical error. A lien could be filed after the title search is complete, before the closing. It is even possible that a problem could arise due to fraud or forgery. With title insurance, you are protected from all of these possibilities.

With a title insurance policy, the insurance company will do whatever is necessary to perfect your title. That could involve negotiating with third parties, filing documents, or hiring lawyers to litigate on your behalf. If the title company cannot perfect your title after guaranteeing it, they will pay your damages. For that reason, buying title insurance for your new home is one of the most important investments that you can make. It’s worth the money to be able to go to sleep in your new home, knowing that your rights as the new owner are protected.

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