Title insurance is essential to a real estate transaction as it protects buyers from potential or unforeseen losses due to title issues. At the time of property purchase, you obtain a property deed or title indicating legal ownership. But sometimes, third parties can threaten or challenge your rights by filing specific claims. Hiring a title company is the best way to avoid these untoward circumstances. They will investigate property records containing tax details, mortgages, deeds, and more to unearth hidden title issues, such as pending tax, non-payment of contractual work before you purchased that house, overlooked heir, etc. If any such situation develops, the title company can rescue you by finding the proper solutions.
If you hire the right title insurance agency, they will guide you through and through with the process. Typically, title insurance can be of two types: Owner’s and Lender’s.
- Owner’s title insurance
It can shield you from legal and financial troubles associated with the property’s title. Homeowners rely on this a lot. When buying a property, it’s necessary to get into its background to understand the status of claims, liens, and other encumbrances. While this process aims to locate and fix title issues before the transaction, some errors or defects can still exist and still need to be discovered. With owner’s title insurance, you can handle any unforeseen consequences regarding pending liens, inheritance issues, frauds, etc. If you face any of these or other problems, the policy can cover the loss up to a specific limit. Generally, this policy type involves a one-time premium paid during property purchase. But the coverage remains relevant for as long you or your members hold an ownership interest.
- Lender’s title insurance
Also called loan policy, it serves the mortgage lender’s real estate interest. You can borrow or take a loan for property. The lender will use this policy to safeguard his money against legal disputes or financial losses caused by property title issues, such as hidden liens, misinformation in public records, inheritance claims, etc. Again, the policy will cover their losses up to a specific limit and be effective until the mortgage is pending. As a borrower, you may have to pay a portion of this policy as a closing cost. However, it only benefits the lender. That’s why homeowners must consider investing in owner’s title insurance for their own good.
- Title insurance coverage
Owner’s title insurance, more specifically, helps you stay safe from potential property title hazards by covering different areas. For instance, you can think of liens. Tax officials, lenders, or contractors can claim the unpaid amount against a property. If you bought a property already, you will bear the cost as the current owner. But title insurance can alleviate this risk. One more concern that title insurance can cover is the easements. Such provisions can entitle another person to use the property you own legally. Suppose utility companies have the easement.
Then, they can visit your property for utility line maintenance. Due to this, you may need more control over your property. With a proper title insurance policy, you can avoid these surprises that disrupt your ownership and usage rights.
What else? You can depend on title insurance beyond easement and lien issues. More precisely, imagine restrictions imposed by zoning laws. You can also consider leaseholder rights on the property. A title policy is always beneficial for endless reasons, such as hidden errors in property inspection, documentation, property boundaries, deeds, wills, encroachment, scams, etc.
- A few other essential points about title policy coverage
Homeowners should consider this insurance type for the security of their investment and mental peace. While these policies cover wide-ranging title-related issues, some exceptions are there. Suppose you don’t wait to pay a lien on your property. The title insurance will not cover this. Or, it may not help if the government confiscates private property for public use. In these circumstances, homeowners usually receive compensation.
Some homeowners believe they can skip buying a policy if they paid cash for their home. The idea is to save money spent on insurance premiums, because hey don’t have mortgages, they feel free. But such decisions can prove costly down the lane. Your financial and legal risks will be higher without the insurance. If unpaid liens and claims against the property surface, you will be alone to deal with them because of the absence of the safety net. And the hidden risks are more likely to appear when you buy a home with cash. The seller may have forged the signature on the papers. Or, someone can claim his or her rights on the property.
Home purchase is a crucial investment and need. Whether you are a first-time or repeat buyer, following the thorough transaction process is vital to skip unwanted occurrences. You want to bask in the joy of home ownership instead of worrying about the potential troubles. So, find out a credible title insurance company and relax.
