Title insurance protects you from problems relating to the title or ownership of your home. Most properties have passed through many different hands, involving many different contractual agreements. It only takes one of these to have been sloppily researched for somebody to lay claim to your home because their great-grandparents were cheated out of it many years ago.
As for the land your home stands on – that could be subject to future land ownership claims or even ancient claims that the land has been illegally seized during one war or another. All of these issues can cost you money – and in a few cases even your land and property. Title insurance covers you for such losses. Here are some other issues that could cost you money:
- Forged signatures at some time in the past
- Illegal land seizure
- Unpaid taxes or liens on the property
Who knows what the history is on your home, and should anybody suddenly make a claim on it then title insurance will cover you for the legal fees and any losses that arise. In fact, such possibilities are regarded by mortgage lenders as being sufficiently likely that they insist on you taking title insurance when you arrange your mortgage loan.
Who Does Title Insurance Protect?
Title insurance involves one individual upfront payment. It protects the lender, and therefore you, from any claims made on the ownership of your home and the land it lies on. Such claims rarely happen, and you would be extremely unfortunate if one should be made. However, it is one more cost involved in taking a mortgage that you cannot avoid.
In certain areas of the country, the onus is on the seller to pay for title insurance to protect the buyer. Ultimately, however, it protects the lender, because without your home as security the lender will not find it easy to force payment of a mortgage from a borrower that has few other assets. If your home is taken from you because of an ownership dispute, you will not find it easy to raise $150,000 or more to pay the mortgage lender! This is why lenders are strict on title insurance.
In fact, you will find that the premium you pay is used by the insurer to carry out further checks on the ownership and title of your home and land. It is not normally kept until a claim is made, but made to reduce the potential for loss prior to the policy being issued. This is just the same as prior to fire insurance, the insurer will check out your home for fire risks. Prior to issuing title insurance, the insurer will check out your home and land for title risks.
You can take out your own policy, but most people don’t bother. The policy must be paid, so they tend to take it with their existing mortgage lender. It is less bother to simply go along with that. However, if you wish, there are companies offering title insurance policies online, making it easier to compare costs and cover and also to pay.