Understanding Title Insurance

By Kurt Real Estate Nov 23, 2019

Being in escrow can be overwhelming for many buyers. Pages and pages of documents flood their inbox and mailbox. A good majority of this they rely on their agent or escrow officer to advise on and highlight where a signature is needed. When it comes to the owner’s title insurance policy, they may not understand the importance of it.

As agents we understand that a buyer’s title insurance policy protects their rights to the properties for the years to come, but as a buyer you should know more.

Title is a buyer’s ownership of the property and should be clear of any and all clouds on that title in order to transfer the property, refinance, etc.

Before closing escrow, your title company searches public records to ensure there are no outstanding liens or encumbrances that may be clouding title. However, sometimes unexpected issues arise after a search is completed. An example of this would be a previous owner of the property never paid a contractor and that contractor, now sick of waiting for payment, files a mechanics lien against the property after the initial search was done. Having a title insurance policy protects a buyer’s rights to the property in these rare instances. In some cases, this could even include providing legal defense.

Lenders require title insurance. Most buyers are not purchasing in cash and therefore are required by their lender to obtain a title insurance policy to protect their loan against any such claims.

In short, the one time fee for title insurance paid at the close of escrow as part of a buyer’s closing costs protects the buyer from a wide array of problems that could arise. This policy will continue to protect them and their heirs as long as they own the property.