Many home buyers see title insurance as one more fee tacked on at the end of a home sale. However, title insurance is one of the most important parts of buying a home. It’s important for buyers to understand what this unique type of insurance protects against and covers, in addition to what could happen if a policy is not taken out.
What Does Title Insurance Cover?
These insurance policies protect against losses from a variety of title defects, liens and encumbrances on titles. Most sales involve two insurance policies, one of which covers the mortgage lender and one of which covers the home buyer. The title check performed as part of the process will check for any mistakes on previous deeds, sales and mortgages and make sure that the person selling the property is the rightful legal owner. Insurance will kick in if a covered defect is found in the title so that clients will be financially protected against title claims or hidden defects after the purchase of the home.
Does Title Insurance Guarantee a Clean Title?
While the title search process is thorough and extensive, it does not offer a 100% guarantee that a property is free from any clouds or liens. Instead, it is an insurance contract that protects the home buyer against financial losses due to things covered by the policy. Everything is not covered underneath a title insurance policy. For example, if a home seller disclosed to your client that there is an unrecorded roadway easement in favor of a neighbor and the buyer proceeds with the sale despite that disclosure, the insurance policy would not cover losses related to the disclosed easement.
Does the Insurer Clear the Title if a Problem Is Found?
Title insurance companies are not promising to remedy the issues discovered in the title search process and after the policy is in place. Instead, every provider has a variety of ways that they can proceed. According to the American Land Title Association, title companies locate and fix title problems in 25% of transactions! In other cases, the provider could try to remedy the title problem, file a lawsuit to resolve the issue, negotiate a settlement with a third party or the insured home buyer or pay the compensable loss on the policy.
Learn More about Title Insurance with Homeland Title & Escrow
Homeland Title & Escrow offers a broad range of title services, including complimentary consultations for first-time homebuyers. To learn more about our services, give us a call at (410) 544-6700.