What is title insurance and how does it work?

Types of title insurance policies

The two main forms of title insurance policies are owner’s title insurance and lender’s title insurance. The owner is often responsible for paying for both insurance policies, even though they may not even realize it, as they are often built into the closing costs.

Let’s review what these two policies cover to help you decide what amount of coverage is right for you.

Lender title insurance

Lender title insurance, which you’ll likely pay as part of your mortgage closing costs, protects your lender against claims against your property that could negatively impact them. Generally, as the owner, you will be the first person responsible for claims against your property. Therefore, if you also want to protect yourself against any potential legal issues that might arise, you will need to purchase owner’s title insurance.

Owner’s title insurance

Owner’s title insurance ensures that you and your lender are covered if unforeseen title issues arise. If you are contacted to pay unpaid taxes or fees – or if you are faced with estate issues or other real estate disputes – your insurer can negotiate and cover the expenses on your behalf rather than letting you sort it out on your own. -same.

If you are not sure whether you have a homeowner’s title insurance policy in addition to the lender’s policy, check with the title insurance agency or company to make sure you can add the title. cover if it’s something you want. In many cases, owner’s title insurance is something your seller can pay in addition to their share of closing costs.

Title guarantee

In some cases, such as private or cash transactions, title insurance is not required.

In these situations, it is important to consider the security of the title. Most real estate transactions have an automatic title guarantee. Security of title is a guarantee by the seller, included in the deed of warranty, that the buyer of the house has full ownership of the property and that there are no claims or liens pending against the house. . If there are indeed problems, the buyer can take legal action against the seller.

If you are buying your home as part of a cash sale or other “unconventional” sale, check to see if the deed includes a guarantee of title. If not, you may want to consider purchasing owner’s title insurance for additional protection.

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