Title Insurance: What It Is & Why You Need It?

For those who have a mortgage on their first home, title insurance is a staple in the home owning process. Before purchasing title insurance for your house, you must first know what the initial purpose of one is and how you go about obtaining it.

Title insurance protects the owner from loss due to problems that might arise in the title of your purchased property. If you are not the first to purchase your home then there have most likely been changes in the ownership which also means changes in title. Because not all transactions are secure, there may have been problems with the transference of title in the past that may come up during your attempt to purchase. Title insurance, in this case, would cover the insured party for legal fees or claims that might arise because of this. However,  title insurance does not guarantee that you will be able to sell your property immediately if a claim does arise. You will need to make sure the claim is fully taken care of before attempting to market your home.

Title insurance ends on the date the policy is issued and extends backwards in time for an indefinite period, but only protects against those losses of events that occur prior to the date of the policy. The property owner’s title insurance is covered forever as long as the actual owner or heirs to the owner still have any interest in the property.

When in the process of purchasing your mortgage, you should approach your realtor or real estate agency about and their policies concerning title insurance. You are not obligated to purchase title insurance. However, all mortgage lenders require that the protection be in an amount equal to the loan. In this case, title insurance acts like mortgage insurance where you pay the premium, which is one payment up front. Though the required title insurance protects you, as the lender, for up to the amount of the home mortgage, it does not protect your equity in the purchased property.

If you plan to shop around for title insurance, please read the following:

• It is recommended to shop around for title insurance in the following states that do not regulate title insurance rates: Alabama, District of Columbia, Georgia, Hawaii, Illinois, Indiana, Massachusetts, Oklahoma, and West Virginia.
• It is considered a waste of time to shop for title insurance in Texas, New Mexico, and some places in Florida as these states set prices for all carriers.
• In the states of Pennsylvania, New York, New Jersey, Ohio and Delaware, insurance premiums are the same for all carriers. These states also authorize title insurers to file for approval of a single rate schedule for all carriers.
• All states not previously mentioned are recommended as “file and use” which allow premiums to vary from insurer to insurer.