Intro to Title Insurance

Intro to title insurance
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Intro to Title Insurance

 

When purchasing a home, there is a lot of behind the scenes work that takes place.  Title insurance plays an important role in the transaction.  Most people are not likely to be familiar with the term, much less know what it is.  A title insurance policy is important because it protects you as the homeowner against financial loss from title defects.  Here is an intro to title insurance to help you better understand it’s role in a real estate transaction.

 

WHAT IS A TITLE COMMITMENT?

 

A title commitment is a title company’s commitment to issue a title insurance policy to the homeowner and/or the homeowner’s lender.  The commitment has the terms and conditions for the insurance policy issued by the title company and takes place before closing.

 

WHAT IS A TITLE INSURANCE POLICY?

 

The title company will issue two separate policies, one to the homeowner and one to the lender, both of which are issued after closing.  The homeowner’s policy is a guarantee from title that they will defend the homeowner in a lawsuit or indemnify you for any loss from a title defect.  The lender policy protects the same way as the homeowner’s policy.  While the policy is not required by Texas, the lender does require one to protect their interest.

 

WHAT IS COVERED BY A TITLE INSURANCE POLICY?

 

Buying a home is one of the biggest purchases you will make in your lifetime.  A title insurance policy is important to protect the homeowner against loss of value from title defects and hazards, which would include fraud, forged signatures on deeds, unknown property heirs, liens (contractors, child support, other legal judgments, etc.), and documentation errors.  36% of all real transactions have been discovered to have title defects associated with the home.

 

WHY IS TITLE INSURANCE IMPORTANT?

 

If your rights to title were ever challenged, and you did not have a title insurance policy, you could be out a substantial amount of money defending yourself or potentially lose your home.  Title insurance covers attorney’s fees and court costs associated with defending your title as part of the insurance policy.  A one-time premium is paid at closing for the title insurance policy and will protect you as long as you or your heirs own the property, even if you refinance.  You will never have to renew your policy.

 

If someone files a lien or tries to claim interest in your property, you will need to notify the title company that issued the policy immediately.  Your claim could be jeopardized for not doing so.  You should also contact the underwriter listed on your title insurance policy and follow their claim-filing procedures.  If you have any questions regarding title insurance, please contact TCP Real Estate today!