What Is Title Insurance and Why Do I Need It?

When buying real estate, it is a good idea to purchase Title Insurance. Title insurance is a contract between the title company and the person that is insured. The insurer bears all loses up the amount of the policy and is subject to conditions, exceptions and exclusions provided in the policy. A title insurance policy insures against loss to the insured in cases that may not be detected in a public records search.

There are several defects that may not be found during the search. Forgery, missing heirs, errors in the tax record, fraud, deeds by minors and mistakes in recording are just a few of the defects that may not be found during a search of the public records. These are called hidden defects. A title insurance policy is a guarantee against the possibility of loss if later a defect on the title is found.

There are two types of title policies: owners title policy and lenders title policy. However, a lender's title policy does not cover the property owner. As the name implies, it only covers the lender in case a defect in the title to the real estate is found.

In most cases, lenders will not loan on property that does not have a clear title and will require a title search to be performed. This protects their interests in the property.

Your banker or real estate agent can explain the different policies and what each cover. There are two types: the standard policy which covers the basic search and the enhanced policy, which covers many more items.

Knowing that a property has a clear title is one less worry when you are purchasing real estate.