Traditional insurance policies protect insureds against future losses. For example, a car insurance policy will protect the driver from future accidents, and a health insurance policy will protect an insured from future health problems. However, title insurance is different because it protects insureds against claims for past occurrences.
When a property is bought, sold or financed, a record of that transaction is generally filed in public archives (the county clerk’s office). Likewise, records of other events that may affect the ownership of a property, like liens or levies, are also filed with the county clerk’s office.
When you buy title insurance for your property, a title company searches these records to find – and remedy, if possible – several types of ownership issues. However, some risks, such as title issues due to filing errors, forgeries, or undisclosed heirs, are difficult or impossible to identify. So after the title company finishes its searching, it also provides a title insurance policy that will help protect you from a variety of issues that might be uncovered later.
If you take out a mortgage loan when you buy your property, your lender will require a loan policy of title insurance. This protects the lender’s interest in your property until your loan is paid off or refinanced.On the other hand, an owner’s policy of title insurance insures your ownership rights to the property. Even though you’ll pay for this policy only once, your coverage will last as long as you own your home.
A real estate purchase may be the largest financial investment you ever make. Purchasing title insurance will protect that investment and buy you some peace of mind.