Buying a new home is one of life’s most gratifying experiences. It can also be one of the most confusing. These FAQs will help you better understand the role of title insurance in protecting your most significant investment.

What is Title Insurance?

Title insurance is indemnity insurance that protects homebuyers and lenders against financial loss due to a defect in the title that could interfere with their property rights. Unlike most types of insurance, such as homeowners or automobile insurance, which protects against future events, title insurance protects against loss due to events that occurred before you purchased the home.

There are TWO types of title insurance policies, but only one protects your ownership rights.

Who Is Protected?

There are two types of title insurance: the lender’s policy and the owner’s policy. The lender’s policy is usually required to get a mortgage loan and insures only the lender's financial investment. The owner’s policy protects your property rights as a homebuyer. Suppose someone else claims ownership of your property or a defect in the chain of title is discovered. In that case, title insurance defends you legally and financially for as long as you or your heirs own the property.

Why Do I Need an Owner's Policy if My Lender Requires an Loan Policy?

Even after the most meticulous search of public records and a thorough review of the property's history, defects in the title can remain undiscovered for months or even years after you purchase a home. The lender title insurance policy only protects the lender, covers the loan amount, and provides no coverage for the homebuyer. Without the protection of an owner’s title insurance policy, your right to ownership may be subject to legal claims against you and the property.

What Are Some Common Title Issues?

With a home being one of the largest investments you’ll ever make, purchasing an owner’s title insurance policy in addition to a lender’s policy is a smart and cost-effective way to give yourself peace of mind.