Title insurance is essential for both home buyers and their lending companies because it protects against claims that may be brought against the property. Without a title search and insurance policy, a government agency, financial institution, or an individual can claim that they hold an interest in the property, leading to the buyer and their lender suffering a loss. Obtaining insurance can help protect against that possibility, so it’s essential to understand how it works.

Why Do You Need Title Insurance?

Who Benefits From Title Searches and Insurance?

You may know that your lender requires you to pay for title insurance, which will name the lender as the beneficiary. While this is true, you should also buy a separate insurance policy that names yourself as the beneficiary. This is a common practice that ensures both the lender and buyer are covered if claims are filed against a newly purchased home.

The homeowner’s policy is a percentage of the total cost of the home, so it’s relatively cheap. This is a one-time fee and provides coverage for as long as you own the home. The insurance purchased on behalf of the lender is a little different. It’s equivalent to the percentage of the loan amount owed on the house and must be paid monthly with the mortgage payment. As you build up equity in the home, the amount you pay for the insurance will be proportionately lower.

What Does Insurance Cover? 

The insurance you buy from a title company will vary based on the state and county laws in your area. Additionally, different companies will offer different options, so coverage can also vary in that way. However, some scenarios are covered by most insurance providers.

Some common situations may include a fraudulent real estate sale in which an individual didn’t have a right to sell the home. Similarly, forged documents may invalidate a sale, resulting in a loss that would be covered by the insurance. It’s also common for the heir of a previous owner to step forward and claim ownership of the property.

What Other Factors Affect a Claim?

These types of title services don’t apply to claims made after the sale of the home. A new claim that’s filed in court after the date that you finalized the purchase of the house would not be covered. However, if the claim was filed before you bought the home and the title search didn’t uncover the claim, you would be covered for losses resulting from that claim.

You have the right to choose your own title insurance company when buying a home, although your lender or real estate agent may recommend one. When you choose Chattanooga Title, you’ll be selecting a trusted title services provider with over 43 years of servicing the Chattanooga, TN, area. Their licensed professionals can evaluate your purchase, perform title searches, and match you with a policy that provides peace of mind. By browsing their website, you can learn more about the title and escrow services they offer. To speak with them directly, call (423) 756-3057 today.