What Is Title Insurance and Why Do You Need It?

What is title insurance, and why do you even need it as a home buyer? Keep reading to find the best answer to these questions.

If you are a new homebuyer or even if you have bought a house before, there are aspects of the home buying process that can be a bit confusing. The terminology used by real estate agents and attorneys alike can be highly technical and even intimidating. We will try to simplify some of this terminology below to help you understand.

Title Insurance Explained

Title insurance is an important part of a real estate transaction, and it is required in many states to protect you as a homebuyer. It safeguards you against financial loss due to defects or irregularities in the title to property that was unknown to you and that happened before your ownership of the property.

This is not an insurance policy for the house itself, but for what is called “title risk.” The house can burn down, but if there are no problems with your title, that wouldn’t affect your ability to get insurance for the home when rebuilding.

If defects are found in the title after you purchase your home, you could lose thousands of dollars if you have to sell it later.

Why Is It Important for a Homebuyer?

When buying a home, it is very important that you obtain a title insurance policy on the property to protect yourself in case of any problems. Title insurance provides you with the assurance that the person selling you the property has the legal right and ownership to transfer ownership of the property to you.

This insurance protects you against loss as a result of defects in the title to your property. It covers legal costs incurred if you should find yourself in court over ownership of your home. A title search (which your attorney will conduct) reveals information about many problems that can affect your title, including:

●     Hidden easements (rights of way)

●     Outstanding judgments

●     Foreclosure proceedings

●     Local zoning ordinances and building restrictions that prohibit structures on the property

●     Encumbrances (liens against your property)

●     Pending lawsuits involving neighboring properties

The policy covers these matters and more. A well-drafted title insurance policy can even protect you from loss resulting from violations of federal statutes governing matters such as wetlands protection, endangered species, and civil rights laws during the settlement of the estate.

Conclusion

One of the easiest ways to sum up what title insurance is, and why you need it: it protects you! When you go through the process of closing on a house, you are buying a lot of unseen risks and problems with the property. Title insurance ensures that, should anything go wrong, there will be financial compensation for your loss. This is extremely important for anyone looking to buy a property, whether you’re a first-time home buyer or an experienced investor.