Sounds boring, doesn't it? Title insurance isn't the most exotic topic, but it's one of those things you just need. A home with a title issue could turn into a major headache and may have serious consequences.
So, What is Title Insurance?
Title insurance protects lenders and owners against title issues tied to your home. There are two types of title insurance - a Lender's Policy and an Owner's Policy. When obtaining a mortgage on a home, most lenders will require that a Lender's Policy be purchased. This type of coverage protects only the lender, not the borrower, on their investment. The Lender's Policy does not cover equity in the property and will not pay legal expenses if there is a problem. Only an Owner's Title Insurance Policy will protect the property owner from defects in title that could have a significant impact on the interest in the property.
If you are not financing the purchase of your home, an Owner's Policy becomes that much more valuable. Far less expensive than lawsuits and legal advice, the one time Owner's Title Insurance premium is simply the best protection for you and your heirs against the unforeseen.
Why Is Title Insurance So Important?
There are several hidden risks that make title insurance a necessity when purchasing a home. Our friends at Signature Escrow and Title Services identify the top hidden risks as:
- Undischarged Prior Mortgages
- Improperly Signed Documents
- Tax, Current Use, or Mechanics' Liens
These are the most common risks that may exist but they are certainly not the only ones. Clerical errors, fraud and missing heirs are among just a few of the other potential problems that could pop up. Taking care of these issues during or after the purchase of a home could be incredibly expensive and a huge headache. Not only could it affect your interest in the property (which is a big enough concern) but if you want to sell your home marketability could be at risk.