What Is Title Insurance?
Title insurance is a form of indemnity insurance that acts as a financial shield protecting lenders and home buyers from unexpected losses due to defects in a title to a property. The two main types of insurance policies are lender’s title insurance and owner’s title insurance. In a lender’s policy, the borrower purchases insurance to protect the lender. In a homeowner’s policy, insurance is often paid for by the seller to protect the buyer’s equity in the property.
How Title Insurance Works
For a real estate transaction to properly close, the title needs to be clean. Title agencies conduct searches on every title transfer in order to check for claims or liens before they can be issued.
A title search is an examination of public records to determine and confirm a property’s legal ownership. Tax liens and conflicted wills are two examples of blemishes that can make a title “dirty.” Unlike traditional insurance which protects you from future financial losses, title insurance shields you from past claims.
