Know What Homeowner Title Insurance Covers and If It’s Necessary

When you buy a property that was once owned by another, you could benefit from homeowner title insurance, especially if there are claims on the title

homeowner title insurance

There’s not much that’s more exciting or confusing than buying a home. The process itself can be a lot of fun, but you do have a lot of things to keep up with. Some of them you’re already familiar with, such as home insurance. But, when the matter of homeowner title insurance comes up, you might not be as familiar with what it is or does. Is it an essential investment when buying a home? How will it protect you and your new property?

I know. You just couldn’t wait to get something else on your plate to keep track of. You’re already looking at real estate agents, inspections, closing costs, and so on. You’re starting to look at these expenses with a wary eye – and you should. It makes perfect sense that you would want to know what homeowner title insurance covers and whether or not it’s necessary before plunking down more cash. 

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Understand these three critical components of homeowner title insurance

Let’s clear up one matter first. Just because you didn’t already know about title insurance does not mean that it’s optional. The majority of lenders require that you purchase a lender’s title insurance policy because it protects the money they lend you.

But, did you catch the difference? That is the lender’s title insurance. While it protects lenders, it doesn’t necessarily protect you. This brings up some essential things to understand:

  • A lender’s title insurance is different from a homeowner’s title insurance. Only a homeowner’s title insurance will protect you.
  • The title insurance protects the financial investment in a home if ownership claims are made on the home by someone other than the original seller.
  • While the lender often dictates whether they will require lender’s title insurance, homeowner’s title insurance is your option.

You are investing in property, and homeowner title insurance will protect you against past owners making a claim on the property. Still, this brings up an important point about when homeowner title insurance is truly necessary.

Realize that homeowner title insurance benefits certain types of properties

Homeowner’s title insurance is protection specific to rights against the property of previous owners, tax liens, etc. Thus, there is no need for homeowner title insurance if you are buying a newly developed property.

Since, in this case, there are no previous owners to the home, you don’t have the same concerns as you would with a house that was bought and sold many times.

Fees and expenses can compound quickly when buying a home. Sometimes, they seemingly come from nowhere. Protect yourself and your money by knowing where the fees are necessary and where they are more negotiable.

Just because you’re spending a lot of money to get into the home of your dreams doesn’t mean you should stop caring about every dollar you spend. Pay attention to what you need most along the way, where you can save money, and where you can afford to spend less can make a huge difference in your total expenses.

Do you feel more confident in your knowledge of title insurance? How will you go about securing title insurance while ensuring that the title insurance attorney you use is qualified for the job?

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  • Your remarks about not needing coverage if buying a new development ignores the fact that liens, easements, back taxes and other concerns couldn’t hurt the new buyer. They can and do. (i’M A RETIRED TITLE OFFICER WHO HAS SEEN THE CLAIMS!)


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