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What is title insurance and how does it work?

Types of title insurance policies

The two main forms of title insurance policies are owner’s title insurance and lender’s title insurance. The owner is often responsible for paying for both insurance policies, although they may not even realize it, as they are often rolled into the closing costs.

Let’s review what these two policies cover to help you decide what amount of coverage is right for you.

Lender’s title insurance

Lender’s title insurance, which you’ll likely pay as part of your mortgage closing costs, protects your lender against claims against your property that could negatively impact them. In general, as a landlord, you will be the first person responsible for claims against your property – so if you also want protection against potential legal issues that may arise, you will need to purchase landlord’s title insurance.

Owner’s title insurance

Homeowner’s title insurance ensures that you and your lender are covered if unforeseen title issues arise. If you are contacted about paying unpaid taxes or fees – or faced with inheritance issues or other real estate disputes – your insurer can negotiate and cover the expenses on your behalf rather than letting you settle the problem yourself.

If you are unsure whether you have an owner’s title insurance policy in addition to the lender’s policy, check with the title insurance agency or company to make sure you can add the title insurance policy. cover if that’s something you want. In many cases, owner’s title insurance is something your seller can pay for in addition to their share of closing costs.

Title Guarantee

In some cases, especially private or cash transactions, title insurance is not required.

In these situations, it is important to consider the title guarantee. Most real estate transactions automatically include a title guarantee. The title guarantee is a warranty from the seller, included in the warranty deed, that the home buyer has full ownership of the property and that there are no outstanding claims or liens on the House. In the event of a problem, the buyer can take action against the seller.

If you’re buying your home through a small cash sale or other “unconventional” sale, check to see if the bill of sale includes a guarantee of title. If not, you may want to consider purchasing landlord’s title insurance for additional protection.