What Does Title Insurance Do?
Title insurance makes sure your home remains your home.
If a property is for sale and you purchase it, you should be able to own it without worrying that someone else may have a claim to it. But more often than you may think, transfers of ownership are hampered by “defects,” or problems, with the title.
Examples of title-related problems
Existence of undisclosed heirs to the property
Tax liens
Recording errors
Pending legal action
Fraud or forgery in the chain of title
Title search errors
Two types of title insurance policies
Both the property owner and the lender should take steps to protect their interests against possible title-related complications. That’s where title insurance comes in.
Loan Policy
- Protects the lender, not the borrower
- Usually required in order to receive a mortgage
- Policy amount decreases as you pay down your loan, and eventually goes away entirely
- Generally paid for by the buyer
Owner's Policy
- Protects the buyer if a covered problem arises
- Usually purchased for a one-time fee at closing
- Lasts as long as you own the property
- Generally paid for by the seller (Minnesota is an exception to this general rule)
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