Home Title Insurance: What It Is, Why You Need It, and How to Get It

When you buy a home, you want to make sure that you have a clear and valid title to the property.

image of a home.
Home Title Insurance [PHOTO COURTESY OF ZIPPO INSURANCE]
A title is a legal document that proves your ownership of the property and gives you the right to use and transfer it.

However, sometimes there may be problems or errors with the title that could jeopardize your ownership rights.

These problems are called title defects, and they can include:

  • Liens or unpaid debts from previous owners, such as taxes, mortgages, or judgments
  •  Errors or omissions in the public records, such as missing signatures, incorrect names, or wrong dates
  •  Fraud or forgery, such as someone impersonating the owner or falsifying documents.
  •  Claims from unknown heirs, such as relatives, spouses, or creditors of previous owners
  •  Boundary or survey disputes, such as conflicting measurements or encroachments by neighbors

That’s where home title insurance comes in.

Home title insurance is a type of insurance that protects you from title defects that could affect your ownership of the property.

It covers the legal fees and costs associated with defending your title and compensating you for any losses.

In this article, I will explain what home title insurance is, why you need it, and how to get it.

What Is Home Title Insurance and How Does It Work?

Home title insurance is a one-time purchase that you make when you buy a property.

Unlike other types of insurance that cover future events, home title insurance covers past events that could affect your title.

It is based on a thorough title search that is conducted by a title company before the closing.

A title search is a process of examining the public records related to the property to identify and resolve any potential title defects.

The title company will issue a title report that summarizes the findings of the title search and lists any exceptions or exclusions to the coverage.

There are two types of home title insurance: lender’s title insurance and owner’s title insurance. Lender’s title insurance is required by most mortgage lenders and protects their interest in the property.

It covers the amount of the loan and decreases as you pay off your mortgage. Owner’s title insurance is optional but highly recommended and protects your interest in the property.

It covers the full purchase price of the property and lasts as long as you own the property or have any liability related to it.

If a title defect arises after the closing and someone makes a claim against your property, your title insurance company will defend your title and pay for any legal fees and costs.

If the claim is valid and you lose your property or suffer a loss in value, your title insurance company will reimburse you for the amount of your coverage.

Why Do You Need Home Title Insurance?

Home title insurance is not mandatory, but it is a wise investment for several reasons. Here are some of the benefits of having home title insurance:

Why Do You Need Home Title Insurance

1.It protects your largest asset.

Buying a home is probably the biggest purchase you will ever make, and you don’t want to risk losing it or having to pay for someone else’s mistakes.

2.It covers hidden risks.

Even if the title search is done carefully and professionally, there may be some title defects that are not discoverable by the public records.

For example, there may be fraud, forgery, or clerical errors that are not apparent until someone makes a claim.

Home title insurance covers these hidden risks and protects you from any potential losses.

3.It is a one-time cost.

Unlike other types of insurance that require you to pay monthly or annual premiums, home title insurance is a one-time cost that you pay at the closing.

Once you buy it, you don’t have to worry about renewing it or paying for it again. It lasts as long as you own the property or have any liability related to it.

4.It may be negotiable.

Depending on the market conditions and the customs in your area, you may be able to negotiate who pays for the home title insurance.

In some cases, the seller may agree to pay for the owner’s title insurance as part of the closing costs.

In other cases, you may be able to shop around and compare different title companies and policies to find the best deal for your needs.

How to Get Home Title Insurance

Getting home title insurance is a relatively simple and straightforward process.

Here are the steps to follow:

How to Get Home Title Insurance

1.Choose a title company.

You can either use the title company recommended by your real estate agent or lender, or you can shop around and choose your own.

2.Order a title search.

Once you choose a title company, they will conduct a title search on the property you are buying.

They will examine the public records and look for any title defects or issues that could affect your ownership rights.

They will also verify the legal description, ownership history, and tax status of the property.

3.Review the title report.

After the title search is completed, the title company will issue a title report that summarizes the findings and lists any exceptions or exclusions to the coverage.

You should review the title report carefully and make sure you understand what it covers and what it doesn’t.

If you have any questions or concerns, you should contact the title company and ask for clarification.

4.Buy the title insurance policy.

Based on the title report, the title company will issue a title insurance policy that protects you from any title defects that are not listed as exceptions or exclusions.

You will pay a one-time premium for the policy at the closing.

You will also receive a title insurance commitment, which is a document that outlines the terms and conditions.

5.Keep the policy in a safe place.

After the closing, you will receive the actual title insurance policy, which is a legal contract that details your coverage and rights.

You should keep the policy in a safe place, such as a fireproof safe or a bank deposit box.

You should also keep a copy of the policy in a digital format, such as a PDF file or a cloud storage service, for easy access.

Conclusion

Home title insurance is a type of insurance that protects you from title defects that could affect your ownership of a property.

It covers the legal fees and costs associated with defending your title and compensating you for any losses.

Home title insurance is not mandatory, but it is a wise investment that can save you from a lot of hassle and headache in the future.

To get home title insurance, you need to choose a title company, order a title search, review the title report, buy the title insurance policy, and keep the policy in a safe place.

By doing so, you can enjoy your home with confidence and security.

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