What Is Title Insurance? The Basics Explained

Monday, June 21, 2021


Did you know that buying a home is one of the biggest purchases a person can make? If you're thinking about purchasing a home in the near future, then you should also look into getting title insurance for your property.

But what is title insurance? And how does it work?

In short, title insurance protects you if your title has a defect. It may sound simple, but it can save you from financial heartache.

Read on to learn more about title insurance, and why you stand to benefit from this crucial service.

What Is Title Insurance?

When you purchase a home, you are transferring ownership from another person over to you. That's called transferring the title of a home.

To prevent issues with or disputes about title ownership, you get title insurance. Title insurance will protect you as a homeowner, and mortgage lenders against problems with titles and transfers.

Considering the amount of money you are going to spend to purchase your home, you don't want to take any chances with it.

When you purchase title insurance, the title company will do a title search to ensure that the home you are purchasing has a clear title. This means that the person who is selling the home actually owns it, and has a right to sell it.

Once the clear title is confirmed, or any potential issues detected, then the title insurance will start the process of underwriting the insurance policy.

A title insurance policy costs between 0.5% to 1% of the home's value, on average.

Title Insurance Benefits

Even though it might seem like an unnecessary additional expense, title insurance has many benefits. For example:

  • It protects you from any disputes related to the title or ownership of the house
  • It protects you from forged deeds or other false documents involved in the purchase of the house
  • It protects you from encroachment
  • It protects you from any liens that might be outstanding by contractors who performed work on the house
  • It protects from you unknown heirs that might pop up out of nowhere, claiming the property as their own

As you can see, there are many unknown factors and risks involved in purchasing a home. It's not as easy as finding your dream home and plunking down the cash.

Title Insurance Types

There are two kinds of title insurance that you need to be aware of. There are lender's policies and owner's policies.

In fact, most mortgage lenders will require a homebuyer to purchase some kind of title insurance. But the title insurance you purchase is usually the lender's policy, which protects the mortgage lender from title defects.

To completely protect yourself, you need to look into getting the owner's policy added on as well.

Getting Title Insurance Is Easy

Now that you know what is title insurance, you can go about purchasing one for your new home. It's not hard to do. You can go with any title company you wish to work with, so shop around as much as possible.

Once you are done with title insurance purchases, contact the law offices of Monastra & Grater for any real estate law inquiries you might have. They have been solving complex real estate issues since 1991 in Pennsylvania.



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