There are many factors involved in purchasing a new home, and one of the most important is obtaining title insurance. Title insurance is essential for protecting your claim to your home, but it can be challenging to comprehend. To make matters more confusing, title insurance misconceptions abound that can mislead you during the homebuying process. To get a better understanding of what title insurance is and how it can protect your property rights, we must correct the following seven title insurance misconceptions.
Title Insurance Offers Minimal Protection
Title insurance is essential for protecting your legal right to own your property. A title search is conducted to uncover any issues that could limit your right to ownership. However, even after the most meticulous search of public records, there could be hidden claims on the title. Your title insurance will protect you from any of these claims that may arise months or even years after your home purchase.
There is One Type of Title Insurance
There are, in fact, two types of title insurance policies, an owner’s policy, and a loan policy. An owner’s policy protects the homeowner against loss or damage in the event of a title defect. If you are obtaining a mortgage loan to purchase your home, your lender will often require you to purchase a loan policy or a lender’s policy.
Title Insurance Requires a Regular Premium
One of the biggest title insurance misconceptions is that it is extremely costly. Actually, unlike most insurance policies, there is no monthly or annual premium for title insurance. The cost is a one-time expense paid at closing when you purchase or refinance your property.
Title Insurance is Expensive
The one-time premium for an owner’s title policy will be based on the purchase price of your home. Ultimately, it accounts for only a small percentage of your closing costs. Additionally, coverage is provided for as long as you and your heirs own the property.
Paying in Cash Eliminates the Need for Title Insurance
Here is one of the most misleading title insurance misconceptions. In truth, an all-cash purchase only eliminates the requirement of a mortgage loan and, therefore, the need for lender’s title insurance. However, an all-cash purchase does not reduce the risk posed by unknown title defects.
Homeowner’s Insurance and Title Insurance Are the Same
Title insurance will protect a buyer’s right to ownership as well as a lender’s investment. Homeowner’s insurance, however, protects you against potential losses or damage to the structure of your home or its contents during an incident.
I’ll Never Need to Use Title Insurance
Of all of the title insurance misconceptions, this one is the most misleading. In 2018, for instance, the title industry spent over $615 million defending the property rights of policyholders. Title issues do arise, and title insurance is a painless way to protect yourself and your property.
A Title Company You Can Trust: Colony Title
At Colony Title, we will help you through the process of getting your property’s title and help you avoid the pitfalls of hidden costs while you buy your home. We are also well trained in identifying any and all errors in public records and helping you resolve them. We specialize in real estate title insurance in both Maryland and Washington, D.C., and we will perform an expert title search, check through all past documentation, and examine records for any fraud or forgery. For more information on how we can get you into the home of your dreams, contact us online or give us a call at (410) 884-1160. To get more updates on housing markets and how to get into your home, follow us on Facebook, Twitter, LinkedIn, and Google+.