If you haven’t heard about it during your homebuying process yet, you will soon. Title insurance may not be as well-known as homeowners insurance or even flood insurance, but it serves an important purpose. Here are the basics.

What is Title Insurance?

Title insurance is protection for you and your mortgage lender against mistakes made in a title search and protects the insured from future losses due to past faults or claims against the property. For example, hidden defects such as fraud, forgery, missing heirs, and even clerical errors can affect title to real estate. There are usually two types: lender’s and owner’s. 

Types of Policies

The lender’s policy is usually based on the amount of your loan and protects the lender’s interests in the property against a problem with the title. The policy coverage decreases yearly, and goes away when the loan is paid off. Owner’s title insurance fully protects the homeowner in the event that there’s a problem with the title that wasn’t discovered during the title search. It also helps pay for legal fees involved in defending a claim to your title. It lasts as long as you own or have an interest in the property.

How Much Does it Cost?

In Texas, title insurance rates are set by the Texas Department of Insurance and depend on the value of your property. If you are a homebuyer purchasing owner’s title insurance, you pay a one-time fee at closing. You may also be able to negotiate with the seller to pay for your coverage.

The Benefits of Title Insurance

Even though claims on title insurance aren’t as common as other types of insurance, they still occur and are complicated legal issues. Think of title insurance as an extra way to protect one of your biggest investments.

Ask your REALTOR® for an overview of title insurance and how to obtain it.

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