Title Insurance: What it is and Why you need it!

what is title insurance

Title insurance provides financial protection against laws arising from problems connect to the title of your new property.  Before you purchased your home it may have gone through several ownership changes.  Their could be a weak link at any point in that chain of owners that could cause trouble.  For example, there maybe unpaid real estate taxes or other liens.  Title insurance covers the insured party for any claims and legal fees that arise out of such problems.  There are 2 kinds of title insurance policies.   A mortgagee  policy covers the lender.  An owners  policy cover the purchaser.    Do you have to have title insurance?  It is mandatory if you are taking out a mortgage because all mortgage companies require title insurance equal to the loan.    The full premium for a title policy is paid at closing and the  policy stays in effect until the loan is fully repaid.  As with mortgage insurance it protects the lender but the purchaser pays the premium.   The required mortgage policy protects the lender up to the amount of the mortgage but it doesn’t protect your equity in the property.  For that type of protection you need an owners policy for the full value of the home.  In some areas sellers pay for the owners policy as part of there responsibility to deliver good title to the buyer.  In other ares buyers must buy an owner policy as an add on the the lender policy.   A standard title insurance policy does not cover the owner for matters that arrive after closing which is a weakness.