What is Title Insurance and Why Do You Need It?

Whenever a buyer relies on a lender to borrow money for purchasing a house, the lender will have to ensure the quality of the property purchased and how “safe” it is to borrow money to the lessee. To ensure protection against possible problems that might arise in the process, the lender will make use of the policy of the so-called “title insurance”, often referred to as ALTA. Whether you have already gone through the process of buying a house or not, you need to ensure you have a good idea of what title insurance is and why it is important to have one. It is common for many not to understand the concept of title insurance. However, buying a house is a considerable investment, which requires you to know everything related to it. Keep reading this article to learn all about title insurance and its importance. What Is “Title Insurance”? Title insurance is designed to protect the lenders against any possible loss that might arise from defects in the title. It covers the lender against any possible hidden risks for as long as the policy is in effect. Keep in mind that this policy is set to protect the lender’s interest. For the buyer to also have some kind of protection, it is essential to invest in another kind of insurance, called the “owner’s policy”. Both policies will be issued at the same time for a one-time fee. For this reason, they are often both referred to as “title insurance”. Your title insurance will be issued after the close examination of the copies of the public records by experts. The examination is supposed to find some relevant title hazards that might affect the quality and the validity of the title. However, even with the most accurate investigation, there might be some title hazard that you’ll be faced with anyways, as it can be difficult to determine in advance. No matter the knowledge and experience of the title examiners, there might be title problems that will not be disclosed during the investigation. Why Is Title Insurance Important? Title insurance is essential as there are risks associated with purchasing a house and borrowing money for it. Some of the most common risks you should be prepared to deal with and that might cause title loss include:
  • False impersonation of the true owner
  • Forged documents (including deeds and wills)
  • Missing or undisclosed heirs
  • Errors in the record of legal documents
  • Deeds by minors or persons considered of unsound mind
  • Fraud
All of the above-mentioned factors commonly affect titles, which is why title protection is important. Why Should You Get It? With title insurance, the lender will be guaranteed protection. Indeed, such a policy will pay for the defense against lawsuits that might attack your title. Also, the insurance will clear up any possible title problems and cover the losses that you might incur. All in all, having title insurance will provide you with protections from any possible hidden risks of the title you decided to purchase.