Title insurance is an important part of real estate transactions, as it provides protection against potential title defects that could adversely affect ownership rights. In other words, title insurance safeguards the buyer’s legal interest in the property, redeeming the buyer from the responsibility of bearing any financial responsibility for title issues that might arise after the deal is closed.
What Does Title Insurance Cover?
Title insurance generally covers items such as outstanding liens, title defects, and the rights of parties with recorded interests that can affect the property’s ownership rights. For example, title defects may include incorrect information contained in the public record, including forged deeds, releases, easements, liens, or other instruments. Additionally, title insurance can cover issue resulting from unpaid taxes, judgments, or an invalid will.
Who Purchases Title Insurance?
Title insurance is typically purchased by the buyer, but the seller may also purchase title insurance. For most real estate transactions, this type of insurance is required by the lender. Its primary purpose is to protect the lender from any title-related risks when they approve the loan.
Benefits of Title Insurance
Title insurance provides a variety of benefits. First, it reduces the risk of costly title disputes, meaning if any title defects are encountered that affect the buyer’s legal rights in the property, the title insurer will pay to have them corrected (up to the policy’s stated limit of liability). Second, title insurance provides protection in the event of title fraud, further protecting the buyer from any financial loss.
Conclusion
Understanding title insurance is essential when you are about to purchase property. If you have any further questions, it’s always best to seek advice from a qualified, experienced real estate attorney.