What It Protects Against
Title insurance coverage usually depends on whether you have a lender’s or an owner’s policy. Generally, you need to buy a lender’s policy if you take out a loan from a public mortgage lender. It covers the lender up to the amount of the loan in the event that any problems arise with the home’s title after financing. A lender’s policy usually stays in effect until you pay off your loan, sell the home or refinance.
An owner’s policy is often issued for the amount you paid for the home. It covers a broad range of problems that may arise. This includes tax liens, deed errors or omissions, forgery of deed documents, fraud and mistakes in the public record. It also covers you if any previous owners’ unknown heirs show up to make a claim on the property.
Some owner’s policies will also offer extended coverage. These protect against things like building permit violations, zoning law violations, certain types of structural damage and inaccurate surveys. If someone sues you or your lender due to a title problem, both policies cover any legal costs or losses. These costs or losses include your down payment, principal payments or the cost of any improvements you’ve made.
Is Title Insurance Really Worth It?
What you pay for title insurance will vary based on where you live and the policy itself. For example, a lender’s policy may cost around $2.50 for every $1,000 of coverage. An owner’s policy may cost a little bit more. Depending on how much your home costs, title insurance could run anywhere from a few hundred to several thousand dollars. If you can see someone suing you later, it may be a small price to pay for peace of mind.
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