What Is Title Insurance?

Let’s start with what it’s not: title insurance is NOT home insurance (which is also known as hazard insurance).

• Hazard insurance covers you if the house catches on fire or falls down.

• Title insurance covers you in case some issue arises from the past in the ownership of the property.

Sometimes, issues come up during the title search (the process by which the title company researches past ownership). In fact, “One out of every three searches reveals a title or public record defect that’s fixed before the transaction closes,” said Jeremy Yohe, spokesman for the American Land Title Association, a Washington, D.C.-based trade association. Some issues that come up after the fact are a past owner or partial owner claiming ownership, fraud, liens, unidentified easements, and outstanding lawsuits.

In any of these cases, if you have title insurance, you’re covered.

The bank will require you to purchase title insurance to cover their interest in the property. You can, and usually do, purchase insurance that covers your interest at the same time. Make sure you understand what you are and aren’t getting covered for when you make the purchase.