What Is Title Insurance?
An important aspect when investing in real estate is having an explicit and clean title. A title refers to the legal right to a property that is obtained by a registered document. Each time a property is passed on from one owner to the next, there is a change in the title as well. Somewhere in the chain of transferrence of the property, there can be some defects in the title.
Title insurance is a type of indemnity insurance designed to protect you from any inadequacies in a property title. Unlike any other insurance, which usually covers occurrences in the future, the title insurance covers you from any incidents which may have occurred in the past which can affect your property rights, thus having a retrospective function.
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How Does A Title Insurance Company Protect You?
Common Issues that Can Arise After Investing In a Property
Some common issues that can arise after you invest in property are:
Liens can get deposited on the property by a contractor, tax authority or lender who hasn’t been reimbursed. You don’t want to get stuck paying a previous owner’s bills or taxes.
Easements are another party’s right to use your property despite you being the owner. An easement could prevent you from using your property as you intended to.
Encumbrances, also known as financial encumbrances, include liens, easements, and zoning laws. These are restrictive agreements imposed by associations of homeowners and leaseholder rights.
Types of Title Insurance
There are 2 types of title insurance; lender’s and owner’s title insurance.
At the time of purchase, lenders require the borrower to purchase a lender’s title insurance policy to secure the lender in case the seller was not legally able to transfer the title of ownership rights. However, a lender’s policy only protects the lender against loss.
Since title searches are not flawless and the owner remains at risk of financial loss from encumbrances they were unaware of at the time of investment, there is a need for additional assurance in the form of an owner’s title insurance policy. Owner’s title insurance is optional, however, recommended for full protection and security of a homeowner’s title rights to the property.
Even though you’ll pay for this policy only once, your coverage will last as long as you own your property and will be passed on to your heirs after you.
Is Title Insurance Required?
A one-time payment for owner’s title insurance can protect lenders and homebuyers from defects in title as well as cover your fees for deep searchers of title data to protect against claims for past occurrences.
If you are feeling unsure about how to protect yourself from financial loss due to defects in your title or are worried about potential legal issues in future, title insurance is a good solution for you.
Here are some of the issues an owner’s title insurance policy can protect you against:
- Property surveying flaws
- Boundary disagreements
- Mistakes in the property contract
- Building code infringements by a previous owner
- Discordant wills
- Claims by an ex-spouse who didn’t approve of the deal
- Liens from contractors, tax workers or previous lenders
- A previous owner’s unpaid child support
- Improperly registered documents
Do I Need Title Insurance?
Investing in a new property or home is one of the most important investments you’ll make in a lifetime. Placing importance on legally securing it against all possible occurrences will guarantee your mind is at peace and your title is clear.
Even though owner’s title insurance is not mandatory, it is highly advisable for foreseeable future title clarity, and it is an in-demand service for more and more current homeowners.
Campus Title Company MD delivers security to the best and highest standards. We aim to provide a reliable, professional and comprehensive service. Thanks to our team of experienced real estate professionals and our reputable research skills, you can rest assured your property’s title is in good hands.