Title insurance is a crucial part of any real estate transaction. It serves as a protective shield against unexpected title defects. These issues could include anything from undisclosed liens, disputes over property boundaries, forgery or fraud in the title history, or other unforeseen defects.
How title insurance works
In most cases, an attorney will guide you through the process of obtaining title insurance. It typically works the same way as any other insurance policy:
- Consultation: The attorney will assess the specifics of your real estate transaction and identify potential risks associated with the property’s title.
- Policy selection: Based on the assessment, your attorney will recommend the most suitable type of title insurance policy for your needs. There are two main types: owner’s title insurance and lender’s title insurance. Both offer protection, but they cover different parties in the transaction.
- Underwriting: Once you have chosen the type of policy, the title insurance company will conduct an underwriting process. This involves a thorough examination of the property’s title history and any potential risks. The goal is to uncover and address any existing title defects before issuing the policy.
- Coverage: After the underwriting process is complete, the title insurance policy is issued. It provides coverage for the specified risks outlined in the policy.
Although having title insurance may not be mandatory, just keep in mind that its primary objective is to safeguard your investment by insuring against potential issues that may arise with the property’s title.
Benefits of title insurance
Title insurance provides a multitude of advantages that are essential for any real estate transaction:
- Peace of mind: With title insurance in place, you can proceed with your real estate transaction knowing that you are protected against unforeseen title defects.
- Cost savings: In the event a title defect surfaces after the transaction, the title insurance policy typically covers the legal fees and costs associated with resolving the issue. Having this insurance can potentially save you a substantial amount of money.
- Clear ownership: Title insurance helps establish and confirm your ownership rights. It ensures that you have a clear and marketable title to the property. These benefits combine to offer you a secure and confident path through the complexities of real estate transactions.
Securing title insurance is a prudent step in any real estate transaction. It is a proactive measure that protects your investment and minimizes the financial and legal risks associated with title defects. With the protection it offers, you can rest assured that your investment remains a sound one.