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Title Insurance: What is It and Why Do You Need It

November 2, 2021 | Comment

Every homeowner will want to cushion their homes against any sudden or unforeseen losses. For this reason, homeowner’s insurance has become a vital consideration. Yet, rarely do people talk about yet another critical insurance policy—title insurance. Perhaps you have yet to hear what title home insurance is. Here are a few insights to guide you.

What is Title Insurance?

A title insurance policy is a home insurance policy that helps cover you against third-party claims on your newly acquired property. Most of the protected claims are often unforeseen or did not arise before closing the real estate transaction. For instance, if the previous owner did not pay their construction company, you get all the protection you deserve from such claims.

Usually, you’ll get this title insurance after carrying out a thorough title search. A title company does this title search, and it is often initiated by a mortgage lender. The goal of this search is to identify any title defects before closing the deal. Some of these defects include easements, encumbrances, and liens.

As such, this title insurance covers the insured against issues that were uncovered during the transaction. Some of the problems covered include the following.

  • Zoning laws that restrict you from living on the property
  • Structures built on the land without your consent
  • Improperly calculated taxes and rates
  • Fraud and identity theft

Types of Title Insurance

There are two types of title insurance: lender’s title insurance and owner’s title insurance. However, they are both initiated or bought by one party. Here is a breakdown of what each of them brings to the table.

  • Owner’s Title Insurance: An owner’s title insurance covers the homeowner against claims made by third parties after closing a real estate transaction. This policy cushions the owner against claims that were not unearthed during the negotiation process.
  • Lender’s Title Insurance: This title insurance protects the lender against any title issues on your property. You’ll also need to acquire this insurance policy whenever you want to get a mortgage.

You’ll purchase these two insurance policies during the real estate transaction process. Remember, you will part with over $1000 for this policy, depending on the property’s value. This cost is about 0.1% of the home’s value. Fortunately, it is a one-off payment.

Do You Need Title Insurance?

It would be best if you got comprehensive title insurance. While it is a little too costly, this policy offers you significant value for money. Here are a few reasons why you need this title insurance.

  • A title insurance Florida policy is one of the most critical documents you’ll need when looking for a mortgage. Investing in this policy will often make the process much more seamless.
  • This policy protects you against various unforeseen or unearthed issues. For instance, you’ll get protection against boundary disputes, conflicting wills, liens from contractors, encroachments, and property survey errors.

No one wants to lose their newly acquired properties because of unearthed errors during the transaction. Investing in this title insurance is one of the best moves to consider if you are to protect yourself against such.

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