When I meet with my clients to sign the documents for the purchase closing, I am often asked, “What is title insurance and why do I need it?”. This column will discuss title insurance and its benefits for homebuyers.
Title insurance is an insurance policy that protects your title or ownership to the property. Unlike other forms of insurance, title insurance is a one-time premium that is paid by the purchaser on closing. The policy lasts as long as the property is owned. Title insurance is standard in residential transactions. It provides coverage to protect your largest investment for a modest one-time premium which is based on the purchase price of the property. Title insurance protects homeowners against a number of defects such as losses arising from fraud, forgery, survey defects, work orders, open permits, title issues and tax and water utility arrears.
Provided the claim is covered under the policy, title insurance provides a direct and no fault resolution to compensation without the need of having to hire a lawyer to sue and start an expensive lawsuit. If a title problem exists, title insurance can assist in providing coverage to insure over known defects that may allow a real estate transaction to close that might not otherwise.
Title insurance is acceptable to all major lenders who will usually request it as a condition of approving the mortgage. In my practice, title insurance is obtained on every purchase transaction because it offers the purchaser excellent coverage and protection of their largest asset.
Title insurance is offered by three or four different companies. Premiums may vary slightly however, coverage is very similar.
If you are purchasing a property you should ask your lawyer to confirm that title insurance will be arranged as part of the closing process.