What is title insurance?

Types of Title Insurance

There are two main types of title insurance policies:

1. Owner's Title Insurance

Owner's title insurance protects the homebuyer’s financial investment in the property. It provides coverage for legal defense costs and any financial losses resulting from title defects. This policy is typically purchased by the buyer and lasts as long as they or their heirs have an interest in the property.

2. Lender's Title Insurance

Lender's title insurance protects the lender’s interest in the property. It ensures that the lender has a valid, enforceable lien on the property and covers the loan amount. This policy is usually required by lenders as a condition of the mortgage and is valid until the loan is paid off or refinanced.

What Title Insurance Covers

Title insurance provides coverage for various issues that could affect the ownership and marketability of the property, including:

• Errors in Public Records: Mistakes in property records, such as incorrect information or clerical errors.


• Unknown Liens: Outstanding debts or claims against the property that were not discovered during the title search.


• Encumbrances: Restrictions or claims on the property that limit its use or transferability.


• Forgery and Fraud: False documentation or fraudulent transactions affecting the title.


• Undisclosed Heirs: Claims by heirs who were not identified at the time of purchase.


• Boundary Disputes: Conflicts over property lines or land boundaries.


• Easements: Rights granted to others to use a portion of the property for specific purposes.


• Missing or Invalid Signatures: Missing signatures on documents or signatures from unauthorized parties.

Why Title Insurance is Important

Title insurance is important because it provides financial protection and peace of mind to both homebuyers and lenders. Key benefits include:

• Protection Against Title Defects: Title insurance safeguards against various title defects that could impact ownership rights.


• Legal Defense Coverage: The policy covers legal costs to defend against claims challenging the title.


• Financial Security: Title insurance ensures that buyers and lenders are financially protected against losses due to title issues.


• Confidence in Ownership: Title insurance provides assurance that the property title is clear and marketable.

How to Obtain Title Insurance

To obtain title insurance, the following steps are typically involved:

• Title Search: A title search is conducted to examine public records and identify any issues or defects in the title.


• Title Examination: The title company reviews the results of the title search to determine the property's title status.


• Issuance of Title Commitment: If the title is deemed clear, the title company issues a title commitment, outlining the terms and conditions of the policy.


• Purchase of Title Insurance: The buyer or lender purchases the title insurance policy at closing. The cost is typically a one-time premium paid at the time of closing.