What is title insurance?
Title insurance provides the lender and the buyer (if you purchase owners coverage) with coverage for losses resulting from specific title defects listed in the policy. In cases where land and property have changed hands over time, there is always the possibility an error has occurred. If an error has occurred, someone else may have an interest in the property, improvements may encroach on property lines or other similar problems may exist. In these scenarios, if you do not have title insurance you could lose your investment in your home. Lenders require “lender’s coverage” to protect their investment and it only protects the lender. Owners coverage is optional and provides separate coverage for the borrower.
Title insurance is the application of insurance principles to the hazards inherent in real estate titles. That’s a legalistic definition, we know. But in the century that title insurance has been used, no one in or out of the title insurance industry has ever been able to completely define title insurance in short terms.
Title Insurance insures a buyer that he or she is getting clear title to the property without any liens or encumbrances. A title insurance company researches the county records to see what has been recorded on the property. The title commitment will show what loans need to be paid off and what restrictions, if any, are on the property. The cost is determined by the sale price and varies with insurers. Typically, the seller pays for the policy, and any endorsements required by the buyers lender are usually a buyers responsibility.
