What is Title insurance?

One of the largest decisions a person can make is to purchase a home or land. A free and clear title to that real estate purchase is imperative. Title insurance is the way to guarantee against title defects and other risks.

Title Insurance is insurance coverage against defects in the title of real estate property. Most lending companies require title insurance with a one-time payment. This insurance may provide compensation if ownership is lost. It also defends the owner against claims. Over half of all real estate transactions have a problem somewhere in the chain of title.

Possible risks may include:

Errors in records

Mistakes in record examining

Fraud

Encumbrances on property

Forgery

Heirs that are missing or undisclosed

Liens

A title company will check for defects against your title before issuing a policy. Title insurance includes an owner's policy and a lender's policy. The premium is a one-time cost at the time of closing the escrow.

Rates should be compared before choosing a title company. Money can be saved by choosing the best company for a homeowner's circumstances. Only consider companies that meet your needs and your lender's requirements.

Always check for discounts that may range from five percent to thirty percent. These discounts can include seniors, first-time homebuyers and special professions. Discounts may also be offered if the lender and the owner used the same company.

Also offered at an additional cost is an optional policy to cover non standard risks. This covers environmental liens such as water and mineral development and boundary accuracy. Check with your company to see if this additional insurance may benefit you.

The amount of title insurance for the lender should cover the amount of the loan. The homeowner should purchase an amount that equals the property value.

Additional Tips

Always check paperwork for accuracy on title insurance. Review the amount of insurance as well as the coverage date. Make sure the property description is accurate.

Don't forget to ask for discounts. These may be available for a number of circumstances. Discounts can occur with a lender and borrower using the same insurance. New developments may offer discounts when buying in bulk. First time homebuyers and senior citizens may also be eligible.

Research your area for costs of additional title insurance due to environmental issues. Depending on your location, this may be a worthwhile purchase.

Title insurance policies will vary per company and location. As with other insurance, a lender would be wise to shop around for the best value and coverage.