Title Insurance can confuse many people, mainly because they first learn about it when buying or selling their home. To prepare you for that moment, we put together five facts about title insurance to empower you to make the best decisions.
1. Owner’s Title Insurance Policy Vs. Homeowners (Hazard) Insurance Policies
Consumers often confuse Owner’s Title Insurance Policy with Homeowner’s (Hazard) Insurance Policies. During the closing process, many consumers will wonder why insurance is being paid for and issued twice. Both sound similar in name, but they are very different. Owner’s Title Insurance is a one-time fee and protects the new owner’s interest in the property for the time they own it. Homeowners (Hazard) Insurance protects a property owner against damage caused by fires, lightning, hail, wind, snow, rainstorms, or other natural events. Both protect homeowners but in different ways.
2. What Your Premium Pays For
Before a policy is issued, a title insurance company conducts in-depth research to detect, prevent, and eliminate risks and losses caused by title problems. They do this by searching public records to develop and document the chain of title to the property and by identifying all outstanding claims. For a one-time premium, the owner’s title insurance policy will remain in effect for as long as you own the property.
3. There is More Than One Type of Title Insurance Policy
The consumer may see a charge for the Owner’s Title Insurance Policy and a Lender Title Insurance Policy fee on the closing statement. The Owner’s Title Insurance Policy in WI is traditionally paid for by the Seller due to the language of the Offer to Purchase. This type of policy protects the new owner’s interest in the real estate. The Lender can take out the Lender’s Title Insurance Policy if the Buyer is borrowing money from a financial institution. The Lender’s Title Policy protects the mortgage, the lien position, and its enforceability on the real estate. The Buyer/Borrower traditionally pays for this type of policy.
4. You Could Research a Property Yourself, but Shouldn’t
While you could channel your inner detective and research a property’s history, this isn’t a good idea. Not all databases are online, and the amount of time, effort, and money to perform the search may not be worth the effort. Without proper experience, you could miss a lot of conflicts of title, and the insurance company may not accept your research.
5. Many can have an Interest in a Single Property
There are so many possibilities for individuals and entities to have an interest in a property. A previous owner didn’t pay estate, inheritance, gift, or income taxes, so the property has a lien. Or a special assessment done by a previous owner has become a lien. Title Insurance can protect you from a loss on your investment if someone attempts to hold you accountable for these issues.