As an adult, you have probably already shopped for and purchased car insurance, health insurance and probably life insurance. As a homeowner, one more insurance that must be considered is title insurance. This is one of the most commonly overlooked types of insurance policies but if you are purchasing a property, it is a critical tool for your home investment. Here is how title insurance works to protect your new property.
Do You Need Title Insurance?
A lenders title insurance policy is a required line item you will be likely to pay for when you close on your home purchase. The purpose of title insurance for the lender is to protect their money which they are lending to you for the home purchase. This protects them, and not the purchaser, in the event that issues arise with the title that could possibly negate the purchase/ownership.
This same protection is available to the purchaser through a separate buyer’s title insurance policy. This can be tough to justify when you are already paying so much money for closing fees, commission and more; however, title insurance for your investment is a critical part of your overall safety strategy when it comes to your new property. Without it, you could find that you have invested significantly in a home only to discover that it is not legally yours, leading to significant financial losses.
The purpose of a buyer’s policy is to shield property buyers from the financial harm associated with title problems. Those problems can range from inconveniences to direct threats to your right to occupy or even keep the property you bought. For these reasons and more, title insurance should always be part of buying a home.
The Most Common Problems Title Insurance Safeguards Against
There are many issues title insurance can protect you against until you are on the receiving end of a major problem. Some of the most common issues that title insurance covers include:
Fraud or forgery – If someone is attempting to claim your home as theirs by forging documents, title insurance can help you cover the costs to fight this fraud in court. Similarly, it is possible that the party you bought the home from was fraudulently selling it which means that it was not being sold by its real owner and therefore making you not the new owner.
Undisclosed liens – If you purchase a property and later discover that it has liens on it, you would be responsible for paying them, regardless of how much is owed or whether you had anything to do with their origination.
Unknown heirs – If a family tries to pass a property onto an heir when someone passes away but is unable to locate the heir(s) to the home, it is then sold to the public. If that heir appears later, they have a legitimate claim to the property as the heir to the inheritance and may try to claim it from its current owner. Title insurance can protect the current homeowner and their investment.
Is Title Insurance Expensive?
The good news about title insurance is that it is more affordable than you may think. Unlike other types of insurance policies where a set amount is paid each month, title insurance is purchased in a lump sum at closing. Usually, this amount is calculated based on a (small) percentage of your home’s total value; depending on the purchase price of your home, it can be a comparatively negligible amount.
Once you purchase the title insurance, you will never need to pay for it again. And best of all, it continues to cover you for as long as you are the owner of the home which could be for the remainder of your life.
What Isn’t Covered by Title Insurance?
Title insurance is a powerful tool, but it does not cover every potential outcome. Some of the most common issues that are not covered by a standard title insurance policy include:
- Zoning issues
- Boundary issues
- Unrecorded special taxes
- Problems that could be identified through an inspection of the property
However, if these issues are of significant concern to you, you can often work with your insurer to add riders that cover these problems. Be sure to speak with the agency of your choice.
Trust the Pros to Help You Protect Your Property
If you are looking for title insurance to protect your property, be sure that you work with professionals who have years of experience. The experts at Mathis Title Company would be happy to help you create the perfect title insurance policy that meets your needs. Contact Mathis Title Company to learn more or to schedule an appointment to get started.