What is Title Insurance?

If this is the first time you’ve bought a home, you may be wondering what is title insurance, and do you really need it.

Title insurance is unlike mortgage insurance (which protects the lender in the event of default); it is not homeowner’s insurance (which protects you in the event of damages to your home); and it is not mortgage life insurance (which pays off a mortgage upon the borrower’s death).

Title insurance protects you and the lender by ensuring that you have full and clear title to the property, that no one else has any rights, liens, claims or encumbrances on your property. If any claims of ownership arise while you or your heirs own the property, the title insurance company which issued your policy is responsible for legal fees to defend your rights, and any losses arising from a valid claim.

The company which issues your title insurance policy conducts a title search to be sure you have free and clear title to the property, that the transfer of that title from the previous owners is handled correctly, and that you are fully protected should anyone claim ownership to the property after your loan is closed.

The title search includes public records, and information from the title company’s database. If title problems are found, they will need to be cleared up prior to your purchase of the property.

Title insurance companies issue two types of title policies:

• Owner's Policy. This policy covers you, the homebuyer.
• Lender's Policy. This policy covers the lending institution over the life of the loan.

Both policies are issued at closing for a one-time premium, if the loan is a purchase. If you are refinancing your home, you should already have an owner's policy that was issued when you purchased the property, so we'll only require that a lender's policy be issued.