What is Title Insurance and How Does it Work?

• January 7th

by UrbanTurf Staff

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Today, UrbanTurf takes a closer look at title insurance and how it works. 

Title insurance is a form of insurance that protects against financial loss from defects in the title of a residential property, such as a house or a condo. The insurance provides coverage in the event that there is an issue with the title that was not discovered during a title search process. A title search is a thorough examination of public records, court records, and other documents related to a property to verify that the title is clear and free of any liens or other issues. Title insurance policies are typically issued to both the buyer and the lender in a real estate transaction.

Title insurance works by paying for any losses or damages incurred as a result of a defect in the title. The policyholder pays a one-time premium at the time of a home purchase or refinance of the property. The cost of the premium varies depending on the value of the property and the policy amount. If a defect is discovered after the purchase or refinance, the policyholder can file a claim with the title insurance company. 

There are two types of title insurance policies: an owner's policy and a lender's policy. An owner's policy protects a buyer's investment in the property, while a lender's policy protects the lender's investment in the property.

An owner's policy is issued to the buyer at the time of the home purchase. The policy covers defects in the title that existed at the time of the purchase, as well as any issues that may arise later.

A lender's policy is issued to the lender at the time of the loan closing. It provides coverage for as long as the mortgage is in effect. The policy covers the lender's investment in the property, protecting them from any losses in case there is an issue with the title.

A title search is an essential part of the real estate transaction, but it is not foolproof. Even a thorough title search may miss issues that can affect the title in the future. Without title insurance, the buyer or lender would be responsible for any losses incurred as a result of these issues.

This article originally published at https://dc.urbanturf.com/articles/blog/what_is_title_insurance_and_how_does_it_work/20683.