How Often Is Title Insurance Used?

By the time you reach the closing stage of your real estate transaction, you have likely envisioned your entire future in your new home. What you likely didn’t include in that dream is a title defect causing you to be financially spent —- or losing your home entirely. 

Title insurance plays a very significant role in securing the future you imagined. Here is an overview of what it is and how often it is used. 

What is Title Insurance? 

Your chosen title company will perform a title search to make sure that there are no issues with the property. Then, to protect yourself in case anything was missed and to ensure title defects don’t appear later down the road, you will be offered the opportunity to purchase a title insurance policy. 

Title insurance protects against financial loss should damage come from a title defect that is discovered after you take ownership. This includes things like missing heirs, erroneously recorded documents, judgments, liens, outstanding taxes or HOA fees, restrictive covenants or easements, outstanding lawsuits, etc. 

Each of these can impact your rights to fully and freely enjoy your property. Title insurance will address them financially and legally, if necessary, on your behalf should it be covered by your policy. 

Types of Title Insurance

There are two main types of title insurance — owner’s and lender’s. Both offer protection for your property, but the owner’s policy solely protects you and your heirs whereas a lender’s policy protects the lender. 

In most places, you will find title insurance to be an optional purchase. However, if you are taking out a mortgage, there is a good chance your lender will require that you purchase a lender’s policy as a condition of your loan. This is all part of their risk management. 

How Often Do You Pay for Title Insurance? 

Unlike other types of insurance, title insurance is only paid one time at closing. The premium is typically based on the sale price of the property, though this can vary based on where it is located. 

More specifically, an owner’s title insurance policy involves one premium payment at closing and it will remain in effect as long as you or your heirs have an interest in the property. 

A lender’s title insurance policy also requires one premium payment at closing (in addition to the owner’s policy premium). This policy is attached to the loan and will remain in effect until the loan is satisfied. 

How Often is Title Insurance Used?

Title insurance is like that investment you hope you never need. 

Nobody wants to use their title insurance policy because that means that your ownership rights could be in jeopardy. But it is there when you need it should something ever happen with your title. 

Working with a reputable title company means that your title has been examined, reviewed, and cleared, usually going through the hands of different title clerks before you close on your property. Anything that could be caught is likely going to be. As a result, many people purchase title insurance policies and never use them. Just knowing it is there in case helps most homeowners to sleep better at night. 

Unfortunately, you never know when a title defect is going to arise. For instance, something could have been erroneously recorded and therefore missed during the title search. When you least expect it, you could find yourself dealing with title issues that can be costly and potentially devastating. 

If you ever find yourself dealing with this situation, you can rest easy if you have purchased a title insurance policy. If not, you are likely wishing you had — but it is a little too late. 

Buchanan Settlement Services is a full-service title company serving the needs of homeowners, sellers, land developers, lenders, attorneys, and real estate professionals.