Title Insurance: Why You Need It and How to Pay Less for It

Title Insurance: Why You Need It and How to Pay Less for It

Article Source: OWNERS.COM

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What Is Title Insurance?

Who Is Protected?

There are two forms of title coverage: a lender’s

Title insurance covers legal costs to defend your

policy and an owner’s policy. If you use a mortgage

title and any damages that result from an invalid

to buy your home, your lender will require you to

title. A claim against your title can jeopardize your

purchase a policy to protect its interest. If the

ownership of the property, so having insurance is

property title turns out to be invalid, the lender’s

not only recommended, it’s often required. Think

policy will reimburse the lender for the

about it: your property most likely changed hands

outstanding mortgage balance.

many times before you bought it. And any of those previous transactions could have defects, which

However, as the property owner, you will lose your

could invalidate your ownership and cause you to

investment and accrued equity. To protect your

lose your home and all that you put into it.

own interest, you need an owner’s policy, which covers the cost of defending your title or

Someone might have once sold the land without a

reimburses you for your losses. The standard

spouse’s permission, for example, or there could be

owner’s policy covers defects from events

forged signatures, contested inheritances from

occurring before the effective date of the policy,

years ago, unpaid real estate taxes or liens from

and an enhanced owner’s policy can cover a

contractors. Having the right insurance can help

greater range of defects and provide for automatic

protect your investment from these scenarios.

increases in coverage limits each year.

Who Pays for Title Coverage?

Why Do Costs Vary?

Title insurance is often very expensive. While a

The cost of insurance and escrow services ranges

buyer and seller can usually divide the closing

widely between states because every state has a

costs, the payment arrangement for title coverage

different set of regulations. Some states require

varies by location. The most common arrangement,

real estate closings to be conducted by attorneys,

however, is that the seller pays for the owner’s

for example. You’ll notice that most attorney-

policy and the buyer pays the more expensive

required states ask the buyer to pay for both the

lender’s policy. In some states, the policy premium

insurance and closing services. Owners.com offers

covers the title search and closing services, and in

a convenient way to buy title insurance when you

others, the services are charged separately and

purchase a home through their online platform.

costs may be split differently.

Competition is also a factor because some states How Can I Save?

regulate title charges, while others allow consumers to shop for less expensive services. In

In addition to comparing the costs between several

states where charges aren’t regulated, consumers

providers, you can also bundle the lender’s and

can save money by comparing title and escrow

owner’s coverage in order to get a discount. You

costs at various providers and choosing a less

should inquire about other deals, such as those for

expensive provider. Check out your state’s policy

first-time buyers, senior citizens or buyers in

on title charges, and if you have the option,

certain professions. In addition, it’s common to

compare providers to save money.

receive a short-term rate for properties that have been resold within the last five years, or a subdivision bulk rate for homes purchased in a new subdivision. These discounts can range from five to over 30 percent, so it’s worth inquiring.