What is Title Insurance? Do I really need two policies?
When you purchase a property, you do not actually get the land itself. Instead, what you really have is “title to the property.” It’s not like vehicle ownership where there is a printed “title”. What we refer to as “ownership” of property is actually a bundle of rights that can be held by some person or entity with respect to some “property” -- and usually includes the right of possession, control, exclusion, enjoyment, and disposition.
“Holding Title” to a property does not mean these rights are absolute and each come with responsibilities, such as paying taxes, being liable for suits brought against the property, and abiding by the laws of the land.
“Title Insurance” provides homebuyers and lenders with protection against losses from title issues including forgery, fraud, and liens. Title Insurance can alert you to hazards on the deed that could lead to a claim and protect you if something comes up after the closing. The property could be subject to claims such as construction liens, past due taxes, assessments, or it may have limited rights and restrictions on how you can use it. It is important to understand and mitigate any issues before going to the closing table.
There are two types of title insurance: owner's title insurance, called an Owner’s Policy; and lender’s title insurance, called a Loan Policy. Most lenders require a Loan Policy when they issue you a loan. The Loan Policy is usually based on the dollar amount of your loan. It only protects the lender's interests in the property should a problem with the title arise. It does not protect the buyer. The policy amount decreases as you pay down your loan and eventually disappears as the loan is paid off.
An Owner's Policy is usually issued in the amount of the real estate purchase. It is purchased for a one-time fee at closing and lasts for as long as you have an interest in the property. Only an Owner's Policy protects the buyer if a covered title problem arise.
Where do you start? Choose a provider for Title Insurance that can also manage the closing process on your behalf. DB Title works as the intermediary between all parties of any real estate transaction to ensure a timely and proper closing—a single resource for Title Insurance, Escrow Management, Document Preparation, and Closing Services.