title insurance myths

f you are purchasing a residential or commercial property, most buyers know that they will need title insurance. But many don’t really know why or what it is for. As a result, there are a variety of title insurance myths shared with buyers that we’d like to dispel. We realize that title insurance can be confusing – especially to a first-time homebuyer, which feeds the misconceptions. To help clarify, we have identified some of the common myths and the truths about them:

Myth: It is expensive to get title insurance

Many believe when looking at the overall cost of title insurance that it is unreasonably expensive. Title insurance is a cost on top of the sale of a home, but the price can be well explained. These costs change based on the state and their regulations, cost of the property and the type of transaction.

Truth: The price of title insurance is based on the purchase price of a home

Your title insurance only accounts for a small portion of your closing costs. It is valid as long as you still own the property, or it is passed to one of your heirs. When you consider the benefits and protections and weigh them against the costs, you can see that title insurance comes at a very reasonable price. Another mini title insurance myth is that there is a large monthly premium, when actually it is a one-time cost.

Myth: You don’t need title insurance if you pay cash

With an all-cash offer, you will not have to use a lender, eliminating the need for any loan or lenders policies. Although you will not need this policy, it does not protect from any future title issues.

Truth: There are two types of title insurance, you still need an owner’s policy

An owner’s policy is the type of title insurance that protects the property owners from damage or loss in any covered title defects in the right of ownership of the property. This will protect you from legal expenses or financial losses from common defects before the date of the title insurance policy. You can also get an enhanced owner’s policy for extra coverage. This enhanced policy will cover any issues before or after the policy date.

Myth: Title insurance doesn’t protect you from much

One of the biggest title insurance myths is that title insurance offers minimal protection. Within your policy it will clearly state the amount of coverage in the terms. A basic title search is conducted before you purchase a home, but issues can arise that lead to disputes on proper ownership of the home.

Truth: Title insurance protects you from undiscovered title defects

Title is the legal right to own a property. Title insurance protects a property owner from disputes related to ownership resulting from previously undiscovered issues. These can include forged signatures on documents, unknown tax liens, undisclosed heirs of previous owners, claims by ex-spouses, recording errors, unknown easements, and more. Despite due diligence during the purchase process, issues or disputes can be uncovered long after the purchase of the property closes. In these cases, title insurance protects the owner if or when an issue surfaces.

If you have any questions about title insurance and steps you need to take to protect a real estate investment, contact us at Landmark Title. Our team of title experts are available to help.