Title Insurance: The Protection You Need

Buying a home can be the wisest and most rewarding investment you’ll ever make. Given that it’s also the single largest investment you’ll ever make, protecting your property from legal and financial claims is a smart decision. Owner’s title insurance plays a major role in making certain homeownership is safe and secure. Owner’s title insurance protects you against a number of title defects that could jeopardize your interest in the home or property you have just purchased, such as an unsatisfied mortgage lien, unpaid taxes, judgments, or other recorded claims against the property. Claims could arise through easements, use restrictions, or other existing covenants, or it could be a hidden risk. 

Common Questions We Hear About Title Insurance

Title search and insurance are critical parts of any real estate transaction, whether residential or commercial. In most cases, the work done by a title company happens behind the scenes, which can make it seem like a mystery to some. In fact, “why should I get owner’s title insurance?” and “what does owner’s title insurance cost?” are two of the most common questions we hear! 

If those questions are on your mind, you’ve come to the right place: we’ve rounded up some of the most frequently asked questions in our industry and answered them for you below.

What Is A Title?

The term “title” refers to someone’s legal ownership of the property. The title also establishes any limitations on those rights.

What Is A Title Search When Selling A House?

A property title search is one of the first steps in the homebuying process. This search is comprehensive, so it looks for all local records and sources to uncover all available information about a property to confirm the property’s rightful legal owner. Most importantly, a property title search will tell you who — besides the owner — has a claim on the home.

What Is Title Insurance? 

If you’re buying a home, title insurance is a policy that protects your investment and property rights. It covers third-party claims on a property that don’t show up in the initial title search and arise after a real estate closing.

There are two different types of title insurance: an owner’s policy and a lender’s policy.

• Owner’s title insurance provides protection to the homeowner if someone sues and says they have a claim against the home from before the homeowner purchased it. The overwhelming majority of homebuyers opt for the additional coverage that an owner’s policy offers. Without it, you will lack coverage for payment of legal expenses or other losses in the event of a problem. Additionally, having an owner’s policy allows you to obtain a discounted rate on a new lender’s policy when refinancing—and that alone can cover a good portion of the cost.
• Lender’s title insurance covers the loan amount in the case of property loss. This policy only ensures that the financial institution has a valid, enforceable lien on the property, and ensures they are in the first lien position. Most lenders require this type of insurance and typically require the borrower to pay for it.

Learn more about title insurance with Clarion Title.

Why Should I get Owner’s Title Insurance?

Owner’s title insurance safeguards your expected rights once you own the property, such as your ability to occupy and use the home as you see fit. It will also ensure that you are not held accountable for any existing liens on the property, provided that they are public records. It covers potential legal fees and court costs for settling claims covered by your policy. This one-time fee covers you and your heirs for as long as you own or retain interest in your home. It is by far the best way to protect your property from future legal claims.

What Does Owner’s Title Insurance Cover?

Sometimes, there may be a mistake that was not discovered during the title search. Owner’s title insurance protects you against certain unforeseeable or undiscovered errors in the title.

Unknown title issues include:

• Unpaid mortgages and judgments, or liens against the property due to the seller’s unpaid taxes
• Litigation pending against the property that could affect you
• A previous owner’s unknown heir claims ownership of the property

Unforeseen title claims include:

• Forgery: making a false document — For example, they provided false information about the person selling the property.
• Fraud: deception to achieve unfair gain — For example, a person steals your identity and sells your house without your knowledge or consent, or takes out a second mortgage on your property and walks away with the money.
• Clerical error: inconsistent paperwork and historical records — For example, a discrepancy in the property line or fence may cause confusion regarding ownership rights.

It is important that a thorough title search be done, but this insurance covers human error or issues that aren’t found in the original search.

What Does Owner’s Title Insurance Cost?

The one-time payment for owner’s title insurance is considered low relative to the value of the home you are purchasing. Most people can expect to pay around $1,000 for coverage, but keep in mind that the exact amount you’ll pay will vary depending on the purchase price of your home. Learn more about how title insurance cost is calculated.

How Long Does Owner’s Title Insurance Coverage Last?

Your owner’s title insurance policy is in effect as long as you or your heirs own the property. The policy is valid for the length of your homeownership and will help you if a title problem occurs.

What Happens At A House Closing For The Buyer?

Closing is the final step in completing a home purchase transaction. It’s the process that allows the handover of ownership to you. This day consists of transferring funds from escrow, providing mortgage and title fees, and updating the deed of the house to your name. Basically, come closing day, you and the seller sign all the necessary papers to officially seal the deal. The final step of the closing process is the most rewarding: getting your keys. Congratulations, you’re now a homeowner!

Where Can I Get More Information?

Clarion Title helps educate homebuyers like you about title insurance so you can protect your property rights. There’s a lot of information to sort through and a lot of options to consider, and Clarion Title is a good place to start. One of our advisors can walk you through the process, keep you informed, answer your questions, and assist you in any way we can.

This material is provided as a courtesy and for educational purposes only. Please consult your title professional for specific information regarding your situation.