Among the many decisions you will need to make when you purchase a home is whether you should buy title insurance and if so, what kind. In the majority of cases, purchasing a title insurance policy is well worth the investment, but you need to ensure that you are paying for coverage that will actually help you.
If you have already started to do research, you may have come across a number of diverse title insurance types: fee policies, lender’s policies, owner’s policies and more. Here’s what you need to know about what all these terms mean and how you can secure insurance that properly protects your home.
What Does Title Insurance Do?
Title insurance is a type of protection that safeguards your investment in your new home. If a problem arises with the deed or your ownership of the property (and the equity you have put into it) may be called into question. In the worst cases, you could even be forced to return the home to the rightful owner, even though you already “purchased” it and may be living in it.
Title insurance covers a wide variety of potential pitfalls, from fraud and forgery in the home’s record history to previously unknown liens on the property. If you buy a home and then it is discovered there are liens against it, you will be responsible for paying those back, even if you had nothing to do with why they happened in the first place.
Title insurance can also protect you from people trying to take ownership of the home. For example, if someone was given the home in a will but the court could not locate them, they may show up later claiming that the home is theirs. Title insurance protects you from situations such as these, either by resolving the issues directly or by assisting with legal fees.
Lender Or Loan Policies
The first exposure many home buyers have to title insurance is when they must pay a fee for a “lender’s policy” (also called a loan policy) prior to closing on a home. If you are financing your home, your lender will typically require you to purchase this title insurance policy for their interests in your property.
This is understandable as they are providing the money to help you purchase your home. If a title issue arises that causes you to lose your home, they would lose their investment as well. Be aware, however, that while it may seem that a lender’s title insurance policy, or loan policy, would provide coverage for you, it does not. It protects only the lender.
Owner, Buyer And Fee Policies
If you want protection for yourself against potential title issues, you will need to purchase owner’s title insurance. While you may have heard of a buyer’s policy or fee policy, rest assured that these are all the same thing: insurance for the purchaser/owner of the home. For this protection, you must purchase an owner’s policy which is separate from the lender’s policy, and incurs two separate fees.
Riders To Alter What Title Insurance Covers
In the end, there are only two primary title insurance types, though they are known by a variety of names. In addition, adding riders to the title insurance policy can change what type of protection it offers. While these specific variants do not have individual names, they can lead to different types of title insurance coverage depending on the situation. For example:
- Market value riders – Ensure that the value of the property tracks with the market, rather than with the original purchase price. This is important for determining some types of damages when a claim arises.
- Zoning additions – Some title insurance policies can have zoning or border provisions added to contribute extra protection. These protect against a home being improperly zoned, as well as disputes that arise when there is a disagreement about the legal location of the border of a property. Depending on the specifics, it may also cover disputes about how easements may be used and where they are located, as well as other issues that commonly present problems.
Obtain Your Title Insurance From A Reputable Agency
Whether you are purchasing your first home or have been through the purchasing process multiple times, do not neglect title insurance as part of the process. The experts at Mathis Title Company would be happy to help you understand how to secure the best title insurance for your needs and parse all of the potentially confusing language surrounding policies. Contact Mathis Title Company to schedule an appointment to get started or to learn more about our services.