If you’re in the process of buying a home, you’ve likely heard about title insurance. Simply put, title insurance is a form of financial protection against loss and related legal expenses related to title defects. It’s also distinctly different from homeowners insurance, which covers you in the event of a fire, natural disasters, weather events, property damage and theft. 

There are, however, often many misconceptions about what title insurance is, what it covers and why it’s necessary for a home purchase. Below, we’ll break down a few of these misconceptions to give you a better understanding of what title insurance is and how it protects you. 

1. There is only one type of title insurance.
There are two types of title insurance — owner’s title insurance and lender’s title insurance. As a buyer, owner’s insurance protects you, the property owner and your interests. This type of policy protects you against loss or damages if you purchase a property with preexisting — but unknown — title defects. Lender’s insurance, on the other hand, is required by lenders as a condition of most mortgages. It protects the lender in the event of a foreclosure or third-party claim.

2. It only offers minimal coverage.
When you begin the process of buying a home, the history of the property will be reviewed via a title search. While generally, the title search should uncover any issues that could limit your right to ownership, it does not protect you from hidden title defects that may be revealed throughout the life of your home. Hidden defects — which may be undiscovered for months or years after your purchase is finalized — include tax liens, third-party claims, document defects and more. 

Standard coverage protects you against financial loss and legal expenses that result from common title defects. Enhanced coverage options can hedge against inflation, extend coverage to your descendants and include coverage over building violations, zoning violations and more. 

3. Title insurance is expensive.
The cost of owner’s title insurance is a one-time premium based on the purchase price of your home. It actually makes up a relatively small percentage of closing costs and will be included along with other expenses like agent compensation, the title search, attorney fees, taxes, loan prepayment penalties and the property survey. Keep in mind that every transaction is different, so some purchases may include less common expenses like repair credits or homeowner’s association fees. 

4. Title insurance requires a monthly or annual premium.
Title insurance is unique among insurance plans as there is no monthly or annual premium. It is a one-time cost that is paid at closing or during a refinancing. Not only that, but coverage is provided for as long as you and your heirs own the property. 

Agents and clients alike can combat misconceptions about title insurance by working with knowledgeable title professionals at Landtrust Title. We work diligently to identify problems, resolve issues quickly and provide you with a comprehensive title insurance policy. Connect with Landtrust Title today — your Partner for Results.