If you are buying real estate with a loan, your lender will likely require you to purchase lender’s title insurance. However, if you are buying with cash, then title insurance is optional. There are two types of title insurance policies:
Lender’s policy – Protects the lender from past title defects until the loan is paid off.
Owner’s policy – Protects the buyer from past title defects until the property is sold or transferred out of the buyer’s name.
A home is the most expensive purchase must of us make in our lives, so it is highly recommended that you purchase title insurance. Title insurance is cheap compared to the purchase price of a home and it protects the home from past title defects for the entire time you own the home.
Even the process of obtaining title insurance protects your home. The process involves a title insurer searching the public records to find and remedy title issues. Items reviewed in the public record can include, but are not limited to liens, judgments, mortgages, easements, divorce decrees, tax records, and deeds. After the title insurer searches the public record, the title insurer will determine to what extent the title is insurable. It is in the interest of the title insurer to clear all title defects before they provide title insurance.
Once you close on your house, title insurance will protect you against past title issues that may not have been discovered prior to closing since it is not always possible to discover all title issues. For instance, filing errors, unknown heirs, fraud, unrecorded easements, and forgeries might be difficult or impossible for a title insurer to identify before closing.