When you buy a home, buying title insurance contributes to your closing costs. Your lender will require you to get this coverage, and it’s wise to purchase a second policy on your behalf. This overview will explain what this type of coverage entails and why you need the extra coverage.

What Is Title Insurance?

Aside from newly constructed homes, every piece of real estate has a long history of ownership, liens, and other claims to it. The insurance you buy from a title company will protect your lender, or yourself, from claims that arise during the buying process. The policy requested by the lender must be paid for by the buyer but name the lender as the policyholder.

Suppose it turns out that there is a significant amount owed in back property taxes, which the title search did not turn up. In that case, the government may have a claim to the property, and the money the lender loaned to you to pay the seller would be lost. However, the lender can file a claim on the title insurance policy to recover the lost sum.

Why Should You Buy Your Own Policy?

Understandably, the lender requires a policy to be purchased on their behalf. After all, their money is at risk if a title search fails to turn up an active claim against the policy. However, the buyer of the property also faces the risk of losing their newly purchased home. If a claim is made, such as in the case of unpaid back taxes, and the homebuyer doesn’t have title insurance, they risk losing their down payment, money paid for closing costs, and their home.

If the buyer purchases a second insurance policy for themselves, they will have the opportunity to file a claim. The insurer will pay the entity filing the claim against the property. In this example, the insurance company would pay the back taxes owed on the property so the homebuyer can keep their home.

Looney & Chadwell Title Services LLC in Crossville, TN, understands the importance of a thorough search and reliable title insurance policy. They serve Crossville and Cumberland Counties, providing the title protection you can trust. Having been in business since 1972, they offer highly honed skills and knowledge of real estate law to each of their clients. To find out more about the company, contact them through their website or by calling (931) 484-7129.