When it comes to buying a home, you have a lot of decisions to make. From who to select as the home inspector to choosing the realtor you work with early on and securing a mortgage from a bank you trust, the entire process is one decision after another.
The reality is that among all this hustle and bustle, the importance of title insurance can sometimes be lost in the hassle and complexity of closing on a home or property. Title insurance can be a valuable asset in your journey to home ownership, but in order to make the right decision for your circumstances, you must understand how title insurance works and what it can do for you.
Protection Against Unknown Heirs and Claimants
In general, title insurance protects you against unexpected issues that arise with the title associated with your property. One of the advantages of a title insurance policy is that you gain more defense against claimants on the home who were previously unknown or unlocated. For example, imagine that you purchase a home and begin paying on the mortgage.
After a year or two, you are approached by a legal professional who informs you that a previously unknown heir of the former owners has been discovered and is making a claim on the property. You may be forced to surrender the home—including all of the equity that you have accumulated in it—without recourse. However, if you have a title insurance policy, you can rest assured that you have more protection against scenarios like these.
Defense Against Financial Losses
As an additional benefit of title insurance, you are also better guarded against financial losses associated with title issues. The previously mentioned loss of equity is just one example, but consider other types of fees that may be associated with a home.
One of the most common issues that title insurance protects against is liens; if you purchase a home and only discover after the purchase that the property has a lien on it or that taxes had previously been left unpaid, you would normally be responsible for paying off those debts, since the property is now yours. However, title insurance defends against these potential outcomes, helping to secure your financial future against unpredictable events.
Is Title Insurance a History Check?
The title of the property that you are purchasing will be examined as part of the buying process, but make no mistake—this is not a comprehensive examination, and things may be missed. Title insurance does not provide this comprehensive assessment either (that would be a title search), but it offers protection against issues that are not uncovered during the purchase process.
Paying for Title Insurance
When people think of insurance, they tend to envision some of the most common types, like health insurance and life insurance. These policies are paid in regular settlements; in other words, you typically pay monthly for your health insurance. However, title insurance does not function this way, which makes it more affordable and convenient for home buyers.
Rather than paying monthly for your title insurance, the policy is typically included among your closing costs as a single lump sum. On average, you will pay about .5% to 1% of the home’s purchase price as a single fee for your title insurance. After that, you can enjoy the policy’s protection, and no further payments are needed.
However, this also means that you must be prepared to work title insurance into your closing process. While it is true that you can still acquire title insurance after you have closed on your home, you leave yourself vulnerable to liens and other issues that may arise in the unprotected period between when you closed and when your title insurance policy goes into effect.
If you have already closed on your home and did not include title insurance, do not feel like you have lost your opportunity! The best time was before closing, but the second best time is now.
Trust the Experts to Educate You on Your Title Insurance Options
Whether you are getting ready to close on a home and need title insurance or you are wondering if title insurance is right for you at all, the best way to proceed is by speaking with a title insurance expert.
The professionals at Mathis Title Company would be happy to explain more about how this type of policy works and how it may benefit you in your specific situation. Reach out to learn more about whether insurance is right for you, which type to choose and how to get the process started.