When it comes to buying a home, there’s a lot of consumer confusion surrounding title insurance. The most common misperception is that because the lender includes title insurance as part of closing costs, it’s not needed by the buyer.
However, lender’s title insurance does nothing to protect you, the borrower! That’s why buying owner’s title insurance is almost always recommended.
But what does owner’s title insurance cover? Isn’t a title search enough? Why is owner’s title insurance recommended?
Let’s take a look at these questions to better understand the role owner’s title insurance plays to keep your investment safe.
Isn’t A Clear Title Enough?
If any liens, encumbrances, or defects are found, those must be resolved before the property can change hands. For example, erroneous surveys or unresolved building code violations are “blemishes” on a title. These must be cleared up before the sale can take place.
However, a title search cannot find what occurs outside the scope of recorded records. Even the cleanest title can have hidden defects.
These include but are not limited to lost wills, forgeries, clerical errors, adverse possession, fraud, illegal trusts, and undisclosed or missing heirs.
A clear title is simply not enough protection against unrecorded transactions because title searches are not infallible.
Not having owner’s title insurance places significant risk on the purchaser if a title defect is present.
Consider discovering unpaid back taxes from a previous owner on your new home. Without title insurance, you, the new owner, would be responsible for paying those taxes, or risk losing your home.
If you purchase a home in foreclosure, there could be many outstanding issues. Owner’s title insurance can protect you against unforeseen title claims.
What Does Title Insurance Cover?
- Flawed records
- Judgments or encumbrances against the property, e.g., outstanding lawsuits, liens
- Property ownership by another party
- Restrictive covenants such as unrecorded easements
- Forgery, fraud, and incorrect signatures on documents
These are the most common errors that are covered with a basic policy. However, you can choose an enhanced policy for deeper protection.
You can review our standard and enhanced polices here.
Why Is Owner’s Title Insurance Recommended?
Just like automobile insurance, you hope you never need to file a claim. However, without it, buyers are exposed to significant risk should there be a title defect.
Don’t risk it.
Owning a home is the biggest investment you’ll make in your lifetime. Choosing to protect it is the wisest decision you can make!
When you’re ready to buy or sell, turn to the pros at Lilly Title & Settlement, a woman-owned real estate settlement agency and title insurance company in Staunton, VA.
We make the closing process on your new home as easy as humanly possible!