Most homebuyers are familiar with other types of insurance (auto, boat, life) but are not certain as to exactly what title insurance is when it comes to buying their home. In order to best protect himself or herself, a savvy homebuyer must insist that title insurance is provided for upon the close of escrow. This insurance policy protects a real property owner, and/or the lender, against any potential loss a prospective home buyer might experience in connection with any liens, encumbrances, or defects in the title for the property they are purchasing that might have been missed in the original title search. To clarify some of the real estate legalese, Liens are usually a form of money encumbrance that usually makes property security for the payment of a debt such as a judgment, unpaid taxes, mortgages etc. An encumbrance is anything the burdens the owner’s title. It is basically any interest in the property, possessed by someone other than the owner. In short, an encumbrance is anything that burdens the title with legal obligations.

For example, a previous property owner might have forged their signature when transferring title or there might have been tax liens owed and secured against the property that did not surface with the original title search. Title insurance then covers the home buyer (insured party) for any claims and legal fees that arise out of such problems.

Title insurance also protects against claims from other defects such as another person claiming an ownership interest, improperly recorded documents, fraud, forgery, liens, encroachments, easements and other items that are specified in the policy.

Unlike other types of insurance (car, life, health, etc.) that basically assume risk for future potential events, Title Policies insure the history of ownership of the real property and the people who owned it prior to the date it was issued. Also, unlike casualty insurers who collect monthly or annual premiums, a title policy is usually paid for with a one time premium which is handled at the close of escrow.

While title insurance is not a type of insurance you buy frequently, if any problem were to arise n the future, you’ll be glad you insisted on buying title insurance when you purchased your home!

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