Title insurance is NOT the same as homeowners insurance. Homeowners insurance is a protection you buy for events that may happen in the future. If you’re buying coverage for potential title problems in the past. Title insurance insures your title while homeowners insurance insures your home and your personal possessions.
the title insurance protects you, the buyer, if the person who sold you the property didn’t have full rights to sell it to you resulting in claims from various defects that may exist in the title. Sharon, what is a defect? There are different types of defects but for example, it can include a person claiming ownership like an ex-partner or a co-inheritor. It could also include a court judgment resulted in a lien placed on the property. There are different types of defects.
There are 2 types of title insurance: lenders title insurance and owners insurance.
If you are a borrower the bank will add it to you because is mandatory but remember that lenders one will only cover or protects the lender. The owner’s insurance it’s optional and is the one that protects you against issues or defects in the title. Even though is optional, you should consider adding it for your own protection. Why? Let me give you an example.
You, as a homebuyer, are looking for your dream home, only to find after closing, unpaid property taxes from the prior owner. Having no title insurance, the financial burden of this claim for back taxes rests solely with the buyer, meaning you. You will either pay the outstanding property taxes or risk losing the home.
Even if you are not financing the purchase of the property, you should still consider owners title insurance to protect yourself if there are issues with the title. The essence of insurance is to protect you from financial loss when the unexpected happens.
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