When purchasing a property, understanding the types of title insurance available is crucial. Title insurance protects against potential issues with the property’s title, which could impact ownership rights. There are two primary types of title insurance:
Owner’s Title Insurance
Owner’s title insurance protects the buyer. This policy is purchased at closing for a one-time fee and remains in effect as long as the buyer owns the property. It safeguards the owner against potential title defects, such as liens, encumbrances, or legal disputes that could arise from previous owners. For example, if a past owner’s unpaid property taxes or undisclosed heirs challenge the current owner’s rights, the owner’s title insurance would cover legal defense and financial losses.
Lender’s Title Insurance
Lender’s title insurance protects the mortgage lender. Most lenders require this insurance as part of the loan agreement. The policy ensures the lender’s interest in the property is secure until the mortgage is paid off. If any title issues arise, the lender is protected against losses up to the amount of the loan.
Why Title Insurance is Important
Both types of title insurance offer crucial protections:
- Legal Defense: Covers legal costs if a title dispute arises.
- Financial Protection: Compensates for financial losses due to title defects.
- Peace of Mind: Ensures that ownership rights are secure and undisputed.
Choosing the Right Title Company
When purchasing title insurance, it is essential to work with a reputable title company like Compass Land and Title. They can guide you through the process, ensuring you select the right coverage for your needs and protecting your investment in your new home.
