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Understanding the Implications of Title Insurance

Updated on October 13, 2015

The title insurance for your home is generally an obscure, less known document that normally nobody cares about, right until the time when you want to put the house on sale. At that point, it becomes the most crucial document for you. It is the only document that secures your right of ownership of the house and without it, you cannot sell it. The probability of making use of the actual coverage provided by the Title Insurance is extremely low; however, the losses you stand to bear in its absence are too high. The below article will provide you with a clear outline on the various applications of Title Insurance

Acquiring Title Insurance

Title insurance in the US is provided by five primary title insurance underwriters. As soon as you sign the purchase agreement for your new home, your agent will initiate the process of acquiring title insurance from one of the underwriters. There is a onetime fee that amounts to around a thousand bucks to acquire title insurance. There are generally no hiccups involved in the process as it's pretty simple and straightforward.

Problems Faced in the Absence of Title Insurance

There are several scenarios where you could run into problems as a result of not having title insurance. You could be tricked into buying a home from somebody who actually doesn’t own the house or there may be issues wherein you bought the house from one of many co-owners not knowing that a legitimate sale would require approval from all co-owners involved. Another scenario where you could face some serious heat involves the one where liens have been filed against your new house in the past. This would translate the existence of public records stating that the proceeds generated from the sale of the house would go to people or agencies to which the seller of the property owes money. This could include anything from taxes or child maintenance.

Lender and Buyer's Policies

The Title insurance is basically comprised of two separate policies. These are the lender's policy and the borrower's policy. You will also be required to buy an "owner's policy" so you have comprehensive protection against any future claims that may arise regarding the ownership of the house. You can never foretell the probability of some long lost relative of the seller appearing out of nowhere staking claim to the ownership of your home. The owner's policy pays for any eventuality that may arise in the event of a case being filed contesting ownership of the house.

Why You need Preliminary Title Report

Prior to the sale going underway, the title insurance provider performs a title search that involves a comprehensive search of public records, former deeds, personal wills, divorce documents of previous owners, any filings for bankruptcy, tax records, and other records. The Preliminary Title report thus obtained does away with potential problems that may arise in the future regarding ownership of the house and if there are discrepancies found, to forgo the sale. This report also provides an outline of the conditions involved for offering title insurance.

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