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What is Title Insurance and Why Do You Need It?

by Kristine Mediate
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Whether this is your first time buying a piece of real estate or you have been here before, there is a good chance that you’ve heard the phrase title insurance. As you make your way through the title process and to your closing, you will likely hear it even more. Why? Because you need it. 

Your title company will offer you a title insurance policy and it is often up to you to decide whether you want to purchase it or not. Gaining a deeper understanding of what it is and why you need it now will help you to make the best decision at closing. 

What is Title Insurance?

Once you sign a contract to purchase property, the title company will begin a title search. This is a deep dive into the public records and chain of title concerning the property – all the way back to its beginning. They look to ensure that there is nothing attached to the title, such as liens, judgments, or outstanding taxes. And they also confirm that the person who is selling it actually has the right to do so. 

A title commitment will be drawn up explaining the findings. And, if all is good then you will be clear to close. Otherwise, you may have to meet some conditions before doing so, such as addressing any outstanding liens or clearing up a survey issue. 

The piece of property you are purchasing is an investment. You wouldn’t buy a top model automobile and drive it without insurance, would you? So why would you risk your new property? Protect it with title insurance. 

Types of Title Insurance

There are two main types of title insurance including a lender’s title insurance policy and an owner’s title insurance. And while they both protect against title issues, they do so a bit differently.

An owner’s title insurance policy is one that protects the owner of the property, just as its name suggests. You pay a one-time fee at closing and you have coverage for as long as you and your heirs have an interest in the property. It is not mandatory to purchase an owner’s title insurance policy, but it is always suggested that you do. 

Another type is a lender’s title insurance policy. This protects the lender only against any title issues that may arise. Because the lender is taking a risk by offering you a loan, they will require this protection. A lender’s title insurance policy is often a condition of your loan. 

Why You Need Title Insurance

So many different things can happen to a property from its beginning until now – and this even includes the land before the structure was built. While a title search does a really good job of seeking out any potential issues, there are things that get missed for one reason or another. And once you take ownership of the property – you take ownership of all the title issues. Unless, of course, you invest in title insurance. 

A few common title defects include:

  • Judgments 
  • Liens
  • Unknown heirs
  • Encroachments
  • Forged or fraudulent documents
  • Easements
  • Recording errors

You may purchase a title insurance policy and never need to use it. Maybe you have purchased one before and never needed it. It only takes one title issue to put your property rights in jeopardy. Don’t take the chance. 

Title Insurance at FIT Agency

If you are in need of title insurance or would like to learn more about it, the title experts at FIT Agency can help. We want you to enjoy your property for as long as you can – without any title issues. 

Contact us today at 732-630-0900

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