What is title insurance?
Title insurance is a form of insurance that provides protection against financial loss due to defects in the title of a property. When you buy a property, you want to be certain that you are the rightful owner and that there are no hidden legal issues or claims against the property. Title insurance helps ensure this by providing coverage for various potential problems that may arise with the property's title.
The title of a property refers to the legal ownership rights and interests associated with it. Before a property is sold, a title search is conducted to examine public records and verify the history of the property's ownership. This search aims to uncover any potential issues that could affect the property's title, such as:
Liens: Unpaid debts or claims against the property that can result in a third party having a legal right to the property until the debt is satisfied.
Errors or omissions in public records: Mistakes or inaccuracies in the recorded history of the property, which may affect the rightful ownership.
Forgeries or fraud: Any fraudulent activities related to the property's title that may not be apparent during a regular title search.
Undisclosed heirs: Unidentified individuals who may have a legal claim to the property due to inheritance laws.
Encumbrances: Any restrictions or limitations on the property's use, such as easements or zoning issues.
Title insurance is typically purchased by the buyer of the property and provides protection against financial loss or legal expenses resulting from these title defects. If a covered issue arises after the property purchase, the title insurance company will step in to defend the policyholder's title and potentially compensate them for any losses up to the policy's coverage limit.
It's important to note that there are two types of title insurance: lender's title insurance and owner's title insurance. The lender's title insurance protects the lender in case of title issues that could affect their mortgage on the property. The owner's title insurance protects the property owner in case of title defects that could threaten their ownership rights.
Title insurance is a one-time premium paid at the time of property purchase, and the coverage remains in effect as long as the owner or their heirs hold an interest in the property. The specific terms and coverage of title insurance can vary depending on the policy and the insurance provider.
