As a new homeowner, you may think that with the transfer of the title and paying for the new house, you are the sole owner of the property. But this is not always the case. It can happen that further down the line, someone may lay claim to your home. How can you protect yourself from such unknown vulnerabilities? Title insurance is your shield.
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What is Title Insurance for a House?
In a real estate transaction, a title policy secures the interests of both the new homeowner and the lender in case of a defective title. Its purpose is to keep the closing fair and safe for all parties. Some of the problematic issues covered under a title insurance policy include the following:
- Liens or lawsuits
- Undisclosed heirs
- Errors in deeds
The title company carrying out the title search at the time of closing can offer you a title insurance policy. You can also shop around for a policy that suits all your needs and budget. However, remember that every title policy has specific terms and exclusions. So, please read the policy document carefully before opting for a policy.
Types of Title Insurance Policies
Title insurance policies are of two types:
- Owner’s title insurance: As the name suggests, this policy protects the new homeowner from third-party claims to the title, pre-policy fraud, an unmarketable title, liens, etc. Owner’s title insurance is optional; but in some states, the seller purchases this policy to incentivize the buyer to close the deal.
- Lender’s title insurance: A lender’s title policy safeguards the lender’s investment should there be any dispute in the ownership of the property later on. This policy is issued for the amount of the loan extended, and the insurer’s liability reduces as the loan amount is paid back. Also known as a loan policy, it is necessary to purchase one if you are buying a house with a mortgage.
How Much is Title Insurance?
Title insurance is offered for a one-time fee. However, the premium rates may differ based on state regulations.
To know how much is title insurance in your state, you can refer to the following table:
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