Tips for Buyers: What is Title Insurance and Why Do I Need It?
When purchasing a new home, there will be many types of insurance that you will be required to purchase as well as ones that are optional. One form of insurance that is both required and optional is title insurance. Title insurance can provide you with an important type of coverage at relatively little cost, and thus it is important to learn more about what this type of insurance is and why you need it.
What is Title Insurance?
As the name suggests, title insurance is a form of coverage that provides protection if problems arise regarding the property title. If you are taking out a mortgage loan, the lender will require you to purchase title insurance. It is important to note, however, that the required coverage only provides the lender with protection. Therefore, in order to protect yourself, you will also need to purchase a personal title insurance plan.
Title insurance may be purchased for a one-time fee and it remains in place as long as the person who is insured retains an interest in the property. If the insured person passes away, the coverage remains in place for as long as the insured’s heirs retain an interest in the property as well.
Why Do I Need Title Insurance?
Title insurance provides you with protection from the hidden risks that may be associated with your purchase. For example, if it is later determined that there are missing or forged documents or if mistakes were made when recording the legal documents associated with your property, you may suddenly find yourself owing back taxes or you may even discover that you do not legally own the property. In either case, you could find yourself losing a significant amount of money. With title insurance in place, you do not need to worry about facing a financial loss because it will be covered by your insurance policy. Not only will the policy pay for your losses, but it will also pay to defend you against any lawsuits associated with the title and will help to clear up any title problems that you may face.
In short, if you do not obtain title insurance, you may not be protected against errors in public records or against any hidden defects or mistakes in public records. Given the relatively low cost of the insurance and the level of protection it provides, it is certainly worthwhile to purchase personal title insurance in addition to the insurance you are required to purchase on the behalf of the lender.