6 Common Title Insurance Misconceptions

Insurance such as car, life, health, etc., protects against potential future events and is paid for with monthly or annual premiums. A title insurance policy insures against events that occurred in the past of the real estate property and the people who owned it, for a one-time premium paid at the close of the escrow. There are a number of misconceptions about title insurance and Arrowhead Title would like to clear up some of these common misconceptions.

Misconception #1: Title insurance is expensive. 
There are several factors that go into calculating premiums for a title insurance policy, and no two policies are the same. Unlike other types of insurance, title insurance has a one-time premium that is paid at the time of closing. This rate can vary, and your title insurance agency can provide you with an estimate of your costs before purchasing a policy so that you can make an educated decision when choosing a title insurance company. Keep in mind that while purchasing title insurance may seem unnecessary and an easy way to cut down on closing costs, it helps protect you from the “what ifs” against the title of your property. It will be far less expensive to you to get the policy than to pay out the attorney fees and court costs associated with defending your property’s title should a claim arise against your property.

Misconception #2: Title insurance only covers the lender. 
While certain title insurance policies do serve to protect the lender, that's not its only purpose. There are two types of title insurance policies. One is a policy known as a “Loan Policy” which is a title insurance policy that covers the lender. The other is an “Owner’s Policy”, which is a separate policy that is purchased separately and insures the buyer. The Loan Policy is typically required by your lender when they issue a mortgage loan to protect their interest should a title issue arise. The buyer is not, however, required to purchase an Owner’s Policy, although it is highly recommended to do so.

Misconception #3: Title insurance will protect the value of my home. 
Title insurance protects your interest in the event that there's a claim that comes up against the title of your home. It does not protect the value and marketability of the property. When purchasing real estate, you are purchasing the title to the property – the right to occupy and use the land. That title may be limited by rights and claims asserted by others, which may limit your use and enjoyment of the property and even bring financial loss. Title insurance protects against these types of hazards. 

Misconception #4: I don’t need a new title insurance policy if I refinance. 
Once you purchase an Owner’s Policy, you and your heirs will be protected as long as you have an interest in the property. However, when you refinance your home, your old mortgage loan is paid off and the lender's title policy expires. Since you are getting a brand new loan, the lender will require you to purchase a new Loan Policy when refinancing.

Misconception #5: I have to go with the title insurance company my bank uses.  
You, as the buyer, have the right and option to seek out and research the wide variety of insurance carriers to write your title insurance policy. While it may seem convenient that the lender or the real estate agent you're working with already have an insurance agency that they work with, keep in mind that they are not always looking out for your best interest. Many lenders may work with title insurance companies that do not have the best rates available and may have their own financial interests in mind.

Misconception #6: I don’t need title insurance. 
Whether you need title insurance or not, your lender will make sure that they are covered in the event that a claim comes up against the title of your home or property. You're not required to purchase an Owner’s Policy, but given the fact that your home may be one of your most valuable assets, it would be wise to spend the extra money upfront to pay the one-time premium to help with the costs associated in case something does come up. The cost involved in defending your property’s title if something does come up isn’t just limited to attorney fees or court costs, but there’s also the costs associated should you have to sell your property, find another home, move somewhere else, etc.

If you are looking to buy a home or want coverage to help you protect any real property you may currently own from any title claims in the future, contact the most experienced title company at the Lake of the Ozarks today. Like many things in life, title insurance is one of those things you don’t realize you need until it’s too late! So, Arrowhead Title today!

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