For first-time homebuyers, title insurance may be a foreign concept. The title insurance that people sign for as part of closing costs has to do with protecting the lender. However, buyers can also purchase title insurance to protect themselves.
Understanding what title insurance is and how it can protect homeowners is important when people are deciding whether to purchase the additional policy.
What title insurance is
Title insurance protects homeowners from a very specific type of financial loss related to a new home. Most people buy a home with a “free and clear title.” This means that there is no lien on the property or other claims. The title research company takes care of finding this information before a sale occurs.
However, there are instances where the research company misses some information and the new owners discover an issue after taking over the property. According to Nerd Wallet, any title defect arising after closing can lead to exorbitant legal costs or even the loss of the property.
Title insurance is a policy that a homeowner can buy to cover the costs of this situation if it should arise.
Title insurance pros
Title insurance can bring great peace of mind for those who find themselves needing it. Not only can it help prevent the loss of the home, but it can help cover any necessary legal fees to get things straightened out.
According to Forbes.com, title insurance can protect people from the following issues:
- Survey errors
- Deed errors
- Contradictory wills
- The previous owners’ unpaid debts
- Other document errors
There are many other scenarios that title insurance can help homeowners with.
While title insurance may seem like a waste to some, it is generally better to be safe than sorry later down the road.