Title insurance covers the damages caused by errors or omissions in the records of ownership for a home or property. It’s usually purchased when you sign for your mortgage. A title insurance policy is designed to protect the rights of the buyers when the title to the property is not in order. It can also be used if the deed isn’t accurate.
Each title insurance policy covers a different type of loan, and it typically has a different cost structure. This coverage starts when you purchase a policy, and it extends indefinitely. It covers both the present and past, and it can only be used for certain transactions.
Why Is Title Insurance Necessary?
Although title insurance is a required component of the mortgage process, it’s often a smart idea to buy it as a responsible homeowner. The insurance can protect you from forged property transfers, unreported easements or liens on the property and document or filing errors. Title insurance can also help you if any defects existed before your policy started.
Although the real number of insurance claims that are paid out to customers is relatively small, there are numerous scenarios where title insurance can often save you a huge sum of money. If you’re planning on buying a foreclosed home, you should make sure that your title insurance covers the losses associated with the foreclosure.
What Does Title Insurance Cost?
For most customers, mandatory title insurance policies cost less than $500 annually. Every state has its own set of requirements for title insurers. More work will be needed by the insurance company to completely verify your new mortgage.
Although title insurance is optional, it’s usually more expensive than a lender’s policy. Some factors can increase the cost of your policy. Your credit score and loan amount can affect the amount of coverage you can buy. A title insurance policy is typically not required after you sell a home.
You may also be able to negotiate with the seller and the lender about sharing the title insurance costs. Generally, the seller is responsible for the cost of the policy.
Can You Choose Which Title Insurance Company To Use?
Although many people don’t do so, there are plenty of companies that offer title insurance for both a home loan and a title policy. You can shop around for discounts if you buy both policies on the same account. Some of the top insurance companies to use include First American, Stewart Title, Fidelity National and Old Republic.
When you provide your mortgage information, you can get quotes from several major insurance companies. This service is very useful if you’re buying a home or a condo. Before, title insurance was typically chosen by professionals.