Title insurance for homebuyers is a policy that protects your investment and property rights against covered legal claims over ownership of your home. There are two types: an owner's policy that protects you and a lender's policy that protects the bank. An owner's policy is a one-time fee, typically around 0.5% of the purchase price, and covers you for as long as you own the home.
Key facts
- Owner's title insurance is a one-time fee, typically around 0.5% of the home's purchase price.
- Coverage lasts for as long as you or your heirs own the property.
- An owner's policy also covers legal fees and court costs for settling covered claims.
- Title Resources Inc. is locally owned and has closed over 10,000 titles across Missouri, Illinois, Colorado, Florida, and Indiana.
What is title?
Title is your legal right to own or use your property. It also establishes any limitations on those rights, such as easements or use restrictions. Clear title means you can hold, sell, or transfer the property without a competing claim.
What is a title search?
A title search is an early step in the homebuying process that uncovers issues which could limit your rights to the property. If a title issue is discovered, most often your title professional resolves it without you even knowing. After the search is complete, the title company can provide a title insurance policy.
What is title insurance?
Title insurance is a policy that protects your investment and property rights if you are buying a home. There are two different types:
- An owner's policy is the best way to protect your property rights. Either the buyer or seller may pay for it, so ask your title professional how it is handled in your area.
- A lender's policy is usually required by the lender and only protects the lender's financial interest. The buyer typically pays for it, though that varies by geography. Ask your title professional how it is handled in your area.
Why should you buy owner's title insurance?
Owner's title insurance protects your investment from certain future legal claims regarding ownership of your property. For a one-time fee, you and your heirs receive coverage for as long as you own your home. The owner's policy also covers potential legal fees and court costs for settling claims covered by your policy.
What does owner's title insurance cover?
Sometimes undiscoverable defects surface after the title search, and an owner's policy protects you against certain undiscovered errors in the title. Covered title issues include unknown items such as:
- Outstanding mortgages and judgments, or a lien against the property because the seller has not paid taxes.
- Pending legal action against the property that could affect you.
- An unknown heir of a previous owner claiming ownership of the property.
Unforeseeable title claims include:
- Forgery: a false document, such as a seller misrepresenting the identity of the person who sold the property.
- Fraud: deception for unfair gain, such as someone stealing your identity to sell your house or take out a second mortgage and walk away with the money.
- Clerical error: inconsistent paperwork and historical records, such as a discrepancy in the property or fence line that causes confusion over ownership rights.
What does owner's title insurance cost?
The one-time payment for owner's title insurance is low relative to the value of your home. A typical policy costs around 0.5% of the home's purchase price. There are no monthly premiums and no renewals.
How long are you covered?
Your owner's policy lasts for as long as you or your heirs own the property. Your life will change over time, but your peace of mind will not. Because the coverage does not expire while you own the home, it can defend against defects that predate your purchase.
What happens at closing?
Closing is the final step in executing the homebuying transaction, and it allows the transfer of ownership to occur. You review and sign your documents, funds are disbursed, and the deed is recorded. Upon completion, you get the keys to your home.
Common questions about title insurance for homebuyers
Is title insurance a one-time cost or a recurring bill?
An owner's policy is a one-time cost paid at closing, typically around 0.5% of the purchase price. You never pay a monthly premium and you never renew it. The coverage continues for as long as you or your heirs own the home.
Do I need owner's title insurance if I already have a lender's policy?
Yes. A lender's policy only protects the bank's loan, not your equity in the home. Only an owner's policy defends your ownership rights and pays legal costs to settle covered claims.
Who pays for the owner's policy, the buyer or the seller?
It depends on where you live. In some areas the seller pays for the owner's policy, and in others the buyer does. Ask your title professional how it is handled in your area so you can plan for closing costs.
What is the difference between a title search and title insurance?
A title search reviews public records to find known problems before closing, while title insurance protects you against covered defects that were missed. The search reduces risk up front, and the policy covers what remains.
Title Resources Inc. (The Title Guy) answers homebuyer questions and protects property rights across five states. Call (636) 527-9670 or email orders@TitleResourcesInc.com, or start your order at titleresourcesinc.com/order-title/. You can also read more at titleresourcesinc.com/faqs/.
