Purchasing a home is probably the single biggest investment you will ever make. When you purchase property, what you actually acquire is title to the property. Your title encompasses ownership, use and possession of the land. However, title to property may be limited by rights and claims asserted by others. Before closing on the house, you’ll want to know that no other individual or entity has a right, lien or claim to the property.

Owner’s vs. Lender’s Title Insurance
There are basically two basic kinds of title insurance: owners coverage and lender (or mortgagee) protection.

For a modest, one-time title insurance premium, an owner will receive continuous title insurance protection in an amount equal to the purchase price of the property or its current market value. Lender’s title insurance is based on the loan amount and is required by lenders as security for their investment in real estate, just as they require fire insurance and other types of coverage as investor protection.

One of the marked advantages of title insurance is that prior to a policy being issued, the title insurance company completes extensive research into relevant public records, maps and documents to trace ownership of the property and determine if anyone other than you has an interest in the property. Through its research, the title insurance company can usually identify any title problems that may arise and have these problems cleared-up prior to closing.

Your title insurance owner’s policy will describe the property and outline any recorded limitations on your ownership. It will also set forth the title insurance company’s responsibilities should any claim covered by the policy terms arise. Typically your title insurance will protect you from loss:

  • If someone contests your title in legal action (the title insurance company will defend the title at no expense to you), or if there is a title defect that cannot be eliminated (the title insurance company will protect you from financial loss – up to the amount of the policy).