What is Title Insurance?
Title insurance is an insurance policy designed to assure that a good title is transferred during a property sales transaction. This investment offers protection by covering any successful claims against the property’s title that might arise after the purchase. The premium for title insurance is typically paid in a single lump sum at the closing of the property sale.
Types of Title Insurance Policies
Mortgagee’s Policy
A mortgagee’s policy protects the lender’s interest in the property. This provides the lender with security against potential financial losses stemming from claims against the property title.
Mortgagor’s Policy
Similarly, a mortgagor’s policy offers protection for the buyer (or property owner) ensuring that they are shielded from most challenges to their property title.
The Necessity of a Title Search
Before issuing a title insurance policy, a thorough title search is conducted. This search investigates the history of the property’s title, checking for any discrepancies or potential claims that might affect ownership. Once the title company completes this search and finds the title satisfactory, they proceed to issue the insurance in exchange for a one-time premium.
Example Scenario:
When Jane decided to purchase her dream home, her mortgage lender required her to secure title insurance. After a detailed title search confirmed the property’s title was clear, Jane paid a one-time premium at closing. This title insurance guaranteed that, as the new homeowner, she wouldn’t face any unexpected claims challenging her ownership rights.
Related Terms: Mortgagee’s Title Insurance, Mortgagor’s Title Insurance, Title Search, Closing Costs, Premium, Property Transaction.
