You’re about to buy a home – or maybe even refinance it. You’re thinking about mortgage payments, moving, getting the kids settled in a new school. More than likely the thing you’re not even considering is title insurance.
Title insurance, however, is definitely important. It protects real estate owners and lenders against any property loss or damage they might experience because of liens, encumbrances or defects in the title to the property. Each title insurance policy is subject to specific terms, conditions and exclusions
In most cases, homebuyers need both an owner’s policy, which protects them, and a lender’s policy, which protects the lender.
If you want to make intelligent decisions, ask these questions:
- What coverage is needed? Owner’s policies usually protect against fraud, forgery, undisclosed heirs and spousal claims. If you feel you need more coverage, remember that will likely increase your insurance cost.
- Is the seller asking you to use a particular title company? If so, don’t feel obligated – if you’re the one who is paying for the title insurance use whoever you chose. If you’re not paying for it but have a company in mind, you might have to split the cost.
- Are prices regulated? In a number of states, they are, so there won’t be much of a price difference no matter which company you choose. However, always look at the quality of insurance and of the title search with the end goal being finding a title company or lawyer that will conduct a thorough search and an underwriter that will be there at least 10 years.
- Who pays for the two policies? This varies from state to state and in some situations from county to county. In some areas, the buyer may pay for one while the seller pays for the other.
- Who has your best interests at heart? If you’re talking to your real estate agent, the seller and the lender, go with the latter. The lender’s interests will most likely mirror yours.
- How much reassurance do you need? You’d like to think that your bank and insurance company are sound and will always be around. The problem is that some actually do go belly up. If you want to make sure the underwriter issuing the insurance is sound, check its financial solvency with a ratings company. You can also get a good idea based on online reviews from past customers.
Before you sign on the dotted line make sure you get the answer to the questions above and that whoever you’re doing business with is above board.