Insurance is usually the last thing on a buyer’s mind, but this should not be the case. Even though title insurance does not cost much, it could be one of the wisest purchases a homeowner could make. A simple document can help prevent a lot of headache and heartache down the road.
Why Protecting Your Title Matters
Buying a home essentially means that you are “taking title” of the property, establishing legally binding ownership. Before you can do this, you must perform a title search to ensure that there are no contesting registrations for the title. This process is a standard part of the closing procedure.
A clean title search now does not mean that there will not be disputes in the future. Legal paperwork can take a long time to process; some of it gets buried for years at a time. At any point a third party can come forward to contest full or partial ownership of the title. Reasons they can legally dispute your claim include:
- Arguments over inheritance arising from an unclear will — heirs to a property could surface and argue a case for ownership
- Home liens — either from unpaid property taxes or unpaid contracting labor
- Clerical errors — a single typo or incorrectly phrased statement can send the legal status of a property claim into limbo
- Illicit claims — some people are capable of fraud or forgery, contesting the validity of a property transfer based on falsified documents
While all of these problems seem like they would not take much to resolve, any one of them might tie your title up in the legal system. You could be forced to defend your claim in an expensive and drawn out civil dispute process. Title insurance will pay for most or all of the legal costs needed to set the record straight and keep you in your home.
The Difference between Lender and Owner Title Insurance
Buying a home through a lender usually means that title insurance will be a requirement for buying the property. This stipulation may seem like enough to protect you, but in reality the insurance you buy will only protect the lender. Should the lender run out of money or decide to give up the fight, the onus is now on you to mount a defense.
Owner title insurance serves as buffer should this instance occur. It can also be enhanced to cover aspects like mineral rights claims or boundary disputes. Always look closely at the title insurance document to see exactly what it covers.
For more advice on home buying, take a look at our dedicated buying page.