Why You Need Title Insurance Before Purchasing a Home (and What Could Happen if You Don’t!)

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Buying a home is a major milestone. For many, it’s one of the biggest and most important investments they will make in their lives.

Title insurance is an easy step that helps protect you while you’re purchasing a new home. Think of it like financial security designed for you as a new homeowner.

What Is Title Insurance?

Simply put, title insurance protects you if there is a defect in the title of the property you purchase.

A title defect means an issue prevents the title from being legally transferred. The defect could be anything from missing information or an error in the title to more serious defects like a mortgage, lien, or legal issue that gives another person or entity a claim to the property, or a claim that was never settled.

When you purchase a house, a title agency will do everything it can to identify the property’s true owner and verify the quality of the title through a title search. If there is a defect, the buyer will typically inform the seller and then they will work to clear the title.

Title insurance is added protection against financial loss if there are any title defects or third-party claims on the property’s title. The title is your proof of property ownership, and the title insurance protects your rights against anyone else who claims it.

Why You Need Title Insurance Before Purchasing a Home

Reasons to acquire title insurance include:

  • Protection Against Unexpected Title Defects

Even with a comprehensive title search, there may still be unforeseen title defects appearing long after you’ve bought your new property. Title insurance protects you from undisclosed issues such as liens, easements, encumbrances, outstanding debt, and even conflicting wills. If a defect in your property’s title or a claim arises, your title insurance underwriter will safeguard your financial interests, including defending you in court and settling any insured claims.

  • Defense Against Unforeseen Risks or Claims

In cases of fraudulent activities or document errors by the previous property owner, title insurance protects you from certain insured risks that might affect your title.

  • Peace of Mind for Your Investment

Title issues or "defects" are relatively common, and problems undiscovered during the transaction can spark costly title disputes. Title insurance provides security and comfort in these circumstances.

  • Long-Term Protection for a Single Premium Payment

While most insurance policies demand a monthly premium, owner’s title insurance only needs a one-time closing fee. This one-off payment covers you from insured risks for as long as you or your heirs own the property.

Don’t Put Yourself and Your New Home at Risk

Remember that title insurance has a distinct role that is different from homeowner’s insurance. Homeowner’s insurance protects the property, the structure, and your belongings. Title insurance, on the other hand, protects your ownership rights to the property.

Remember the importance of purchasing title insurance before buying or refinancing a home. If you have questions or want more information on title insurance, contact the Network Land Title Agency team.

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