What Is Title Insurance?

When reviewing your closing costs, you run across something called Title Insurance. You may ask yourself “What is this and why am I paying for it?”. This is often an overlooked item but a necessary part of completing your real estate transaction.  In our market area the seller generally pays for the title insurance and chooses the title company.

Title insurance basics:

For many, title insurance is a mysterious component of the real estate transaction. Here’s what you need to know.

  • What is title insurance?

Unlike other types of insurance which protect against future events, like car, health or travel, title insurance covers you for things that occurred in the past of the property. This could include things like another person claiming an ownership interest, improperly recorded documents or fraud and forgery.

  • Why do I need title insurance?

When you buy a home, or any property for that matter, you expect to occupy and use the property as you wish, to be free from debts and obligations not created or agreed to by you, and to be able to freely sell or pledge your property as security for a home. Title insurance is designed to protect these rights.

  • Are there different types of title insurance?

Yes, there are two types of title insurance, owners and lenders. Owners coverage is a policy that protects the owner against adverse claims against the property. Lenders coverage protects the lender for the amount of the loan on the property.

A real estate purchase may be the largest financial investment you ever make. So, when you buy an owner’s policy of title insurance, just think of it as buying some peace of mind!

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