Title insurance is one of the most important ways to protect your real estate investment, although deciding whether lender and owner policies are necessary can be challenging.
If you end up with a property with a defective title and don’t have title insurance, you risk losing the house and/or thousands of dollars, depending on the situation.
We’ve uncovered the truth about title insurance and answered the question, “What is title insurance?” We’re here to help you understand the difference between lender’s and owner’s policies.
What Is Title Insurance?
When you purchase a property, you become the owner of title. A title gives the property owner rights to the property, including the right to own, use, and sell the property as desired.
The chain of title refers to the owners of the property and is where defects can occur. For example, a property owner could be not satisfying a lien or illegally transferring the property, which could lead to financial loss.
Title insurance is an insurance policy that protects the insured against title defects causing financial loss. The title defects can include things like improper outstanding legal or financial issues or improper transferring of the property.
If a previous owner or creditor were to come forward and demand payment or resolution of the property ownership issues, title insurance could help with the financial cost of such issues, including court costs.
Title insurance covers any occurrences before you took ownership of the property that didn’t appear in the title search the title company did, which then provides the title insurance.
The title search should ensure the title is “clean” and the property can be transferred, as the title examiner researches all public documents regarding the property.
Do You Need Title Insurance?
Although lender’s title insurance is almost always required when you finance a property, an owner’s policy is optional.
A lender’s…