The biggest investment you will make in your life will likely be the purchase of a home. So before you close, you need to know that no one else can claim the property.
A title insurance company does all the research to insure that a property has clear title. Making sure that a property is clear of all legal encumbrances is the job of a title insurance company.
For a modest, one-time title insurance premium, you will receive continuous title insurance protection equal to the purchase price of the property or its current market value.
The title insurance company searches the title history of the property. The title insurance company can almost always identify any title problems and have these problems cleared-up prior to closing.
Real Estate law is extraordinarily complicated. Title companies make sure that all the T’s are crossed and all the I’s are dotted so you don’t end up with a clouded title and legal problems. Your owner’s policy will describe the property and outline any recorded limitations on your ownership. It will also cover what the title insurance company is responsible for. Title insurance usually covers:
- Contested Title — This usually happens when someone who owned or even lived in the home before you claims to still hold an interest. In this case, the title company will defend the title and will cost you nothing.
- Defective Title — This is a general term for a legal problem with the title that cannot be corrected and includes “contested title” above. Defects are rare, but they can be very difficult, making the property inaccessible, unable to be built, or unsaleable. Many other complicated problems define “Defective title.” The title insurance policy will protect you from these errors if the title company doesn’t discover them.