Title Insurance: Myths vs Facts

When you hear the term "title insurance," what comes to mind? Do you think you know what it means?

Title insurance is arguably one of the least understood aspects of the home closing process. We have found that most people either respond to the questions above with blank stares, vague responses, or incorrect information. Today, the team at Arrowhead Title, Inc. is here to clear up some of the misunderstandings about title insurance at the Lake of the Ozarks by debunking some of the myths surrounding the title insurance industry.

MYTH:  Title insurance automatically comes with the house.
FACT:  Most lenders will require a title search and a title insurance policy to cover their loan, but these services are not included in the purchase of the home. Home buyers will be responsible for purchasing these extra services at closing.

MYTH:  There's only one type of title insurance.
FACT:  There are actually two types of title insurance: lender's title policies and owner's title policies. Lender's policies protect the lender in the event that the owner forecloses on the house or is otherwise unable to pay back their loan. Owner's policies protect the homeowner in the event that something or someone threatens their right to the property, such as unknown heirs or forged signatures. Purchasing a lender's policy is often mandatory, but home buyers are strongly encouraged to purchase an owner's policy as well.

MYTH:  I won't need to purchase title insurance if I refinance.
FACT:  As a homeowner, it is always a good idea to have an owner's title policy in your back pocket. Even though you aren't moving to a new home when you refinance, you're still taking out a brand new loan. Regardless of whether you change lenders or not, the lender responsible for your new loan will almost certainly require you to purchase a new lender's policy.

MYTH:  I don't need title insurance.
FACT:  Everyone needs title insurance. You may think you know the entire history for the house you're purchasing, but it's impossible to know everything. Title insurance protects your right to the property in the event that a previously unknown heir claims ownership of the property, if it is later revealed that the "sellers" were not the rightful owners, or if liens against the property resurface. If you have an owner's title insurance policy, you will not be responsible for paying any of the fees associated with protecting your right to the property, should these types of issues arise. 

MYTH:  Title insurance is simple - you just sign up and you're good to go.
FACT:  Title insurance is simple for the buyer, but it's actually a very complex process. When we receive an order for a title insurance policy, the team at Arrowhead Title, Inc. conducts a very detailed, in-depth search of all the public records surrounding the property in question. This is called a "title search," and the purpose is to uncover any issues that might be connected to the property. This way, if any issues are found, the sellers and buyers can resolve them before the sale of the property is complete.

Even with the most in-depth title searches, mistakes can happen. Title insurance policies protect homeowners and lenders in the event that issues later arise that were not uncovered in the initial title search. The risks of not having title insurance can be devastating (see our previous blog post on the risks of not having title insurance). All of us at Arrowhead Title strongly encourage you to do your research and invest in a title insurance policy.

If you have any questions about the process or title insurance in general, please don't hesitate to reach out to us! Our professional, experienced team is here to help you with anything you need. 

Where Accuracy Matters!


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