Title insurance is an important factor when considering a commercial or residential property. However, misconceptions and myths about title insurance are frequently shared among buyers. Before purchasing real estate, learn the facts to be sure not to fall for these common myths about title insurance.
Myth: Title Insurance offers minimal protection
Many people mistakenly think title insurance just offers minimal protection. The reality is there are
different types of coverage and the coverage can vary. The terms of the policy will clearly state the amount of coverage provided by a title insurance policy. Title insurance provides coverage for a variety of pre-existing issues on a property, including:
- Forgery on vital documents
- Deed errors
- Unknown liens
- Undisclosed heirs of previous owners
- Unknown easements
- Boundary / survey disputes
- Adverse possession
Myth: Title Insurance is expensive
Another common myth is that title insurance is an expensive addition to a real estate purchase. In reality, the cost is only a fraction of closing costs and it provides necessary protection on a transaction. You can also request a complimentary quote to learn more about what title insurance will provide within your budget.
Title insurance policies protect lenders, sellers, and buyers from financial loss sustained from defects in a title to a property. Title Insurance is an additive cost on a sale, but the policy cost is miniscule compared to potentially losing a home due to a title dispute. Learn more about what to expect in closing costs here.
Myth: There’s only one type of title insurance
Unlike most insurance policies, there are two different types of title insurance: an owner’s policy and a loan policy.
Owner’s policy: Protects the property owner against loss or damage in the event there is a covered title defect in the right of ownership to the property.
Standard coverage of the owner’s policy protects against financial loss or legal expenses related to common title defects if they occurred prior to the date of the title insurance policy. However, an owner can opt for more enhanced coverage that includes the standard coverage plus coverage against matters that may happen after the date of the policy.
Loan or Lender’s policy: Protects the lender’s interest in the property until the mortgage loan is paid in full. The loan policy provides no coverage to the homeowner.
Myth: Buyers do not get to choose the title company
Whether the insurance policy is for a business purchase or personal home purchase, a title insurance policy helps protect against any losses or changes should the title to land have any contingencies. Consumers have the right to shop for the title insurance company and they are fully protected by law under the Real Estate Settlement Procedures Act. This means that a buyer can advise a real estate agent or lender to use the title insurance company of their choice. This allows a buyer to use a reliable title company like Landmark Title and work with knowledgeable, dedicated professionals that will help facilitate a smooth closing experience.
It is important to note that the real estate contract determines who pays for the title insurance and generally the party paying will choose the company. If you have further questions about title insurance, please contact us today or explore our blog posts for more information.