What exactly does title insurance cover? Title insurance protects against problems affecting the title to your home, possibly your most valuable asset. There are two types of title insurance – a lender’s policy and an owner’s policy. When you obtain a loan (and a refinance is a new loan), then lender will require that you purchase a lender’s title policy to protect their investment in the property. Owner’s title insurance is optional, but it protects the homeowner by paying claims and legal fees should a problem arise.
Having a serious problem with my title seems rather remote. Is insurance really necessary? Title companies find problems in more than 25% of their title searches. Problems include items such as liens from unpaid child support, alimony, taxes or from unpaid subcontractors. Other things that can cloud title that are not so easy to detect include forged signatures in the chain of title, recording errors in the public record, undisclosed easements and title claims by missing heirs and/or ex-spouses. For this reason, title insurance is highly recommended.
Does a lender’s title insurance policy protect the homeowner? No. A lender’s policy protects the lender’s interest in the property should a problem arise. It does not cover the owner’s equity in the property and will not pay the homeowner’s legal expenses if there is a problem. Only an owner’s title insurance policy will protect the homeowner.
Are all title insurance rates the same? Rates for title insurance are filed rates with the State of Ohio Department of Insurance. Exam and closing services vary from company to company. And there may be variations depending on the lender you work with. Ask for a recommendation for a title company from your real estate agent, lender, friends and family to find one that others have been satisfied with. If you are refinancing and purchased title insurance within the last several years, ask if there are special discount rates available.