Title insurance is an important part of any real estate transaction as it protects the ownership interests of the parties involved in buying a piece of property, whether it’s a home, commercial building, vacant lot or other type of real estate. Unlike other kinds of insurance (such as auto or health insurance) which protect the policyholder against future events or losses, a title insurance policy provides protection against claims that arise from past events that may not have been detected in past title searches.
Here are just a few examples of problems that can affect a buyer’s home ownership:
- An unknown heir of a previous owner asserts a claim to the property.
- There are unpaid property taxes that created a lien on the property.
- There was fraud or forgery involved in a previous deed or title transfer.
Types of Title Insurance
There are two types of title insurance: an Owner’s Policy and a Lender’s Policy. As a buyer, the Owner’s Policy protects you against covered risks listed in the policy. Your policy
provides protection for the value of the purchased property at the time of sale, unless you choose to buy additional coverage. The policy stays in effect for as long as you or your heirs own the property. Additionally, your policy continues to protect you for as long as you remain liable for any title warranties after selling the property.
If you are borrowing money from a mortgage company or other financial institution to buy real estate, a lien will be placed on the property to reflect the lender’s ownership interest. Your lender will require that you purchase a Loan Policy to protect the lender’s interest. That policy will remain in effect until you pay off your loan.
Title Insurance & Closing Costs
Payment for title policies is included in the closing costs for buyers and sellers. Which party pays can be negotiable. In Texas, the homebuyer traditionally pays for the Lender’s Policy to protect their lender and the seller pays for the Owner’s Policy to give their buyer peace of mind. When negotiating a contract, whether resale or new construction, the determination of who will cover these policy costs is made. Coverage and prices are regulated and set by the Texas Department of Insurance (TDI), which also requires that the rate for the premium include the cost of the title search itself. By regulating this cost, all Texas title companies must charge the same amount for title insurance. Unlike other types of insurance, a title policy is paid for in a single payment at the time of closing. It is not a recurring cost for the buyer, seller or lender that is paid annually or at other intervals.
N Title is a Houston-based title insurance agency with teams experienced in all matters related to residential and commercial closing services. We encourage you to contact us today to discuss any questions you may have.