Understanding Title Insurance: 7 FAQs

April 18, 2019

Securing title insurance at the Lake of the Ozarks is a critical part of the home buying process. Unfortunately, title insurance is arguably one of the most poorly understood forms of insurance. In fact, although many homebuyers hear about it as they prepare to purchase their homes, they do not understand its true purpose - they simply accept it as a normal part of the closing costs. Today, Arrowhead Title, Inc. is here to help by answering some of the frequently asked questions regarding title insurance.

What is a Title?

A title is a legal document that serves as evidence of an owner’s right to possess a property, whether that be a home, a commercial piece of property, or a piece of land.

What is Title Insurance?

Title insurance, as the name suggests, protects the title of your home. Title insurance protects against various types of defects that may exist in the ownership of a home or property. The difference between title insurance and other forms of insurance lies in the fact that title insurance protects against PAST errors that could affect current property ownership and the right to own property.

What is a Title Search?

A title search is a detailed search of past historical records on the property in question. A title search examines past deeds, liens, tax records, court records, and other documents pertaining to your property. A title search is performed by title professionals who scour public records to find any errors that may need to be resolved before closing on a property. By uncovering these issues prior to closing, they can be resolved before they become the sole responsibility of the home's new owner.

What Issues Can a Title Search Uncover?

Examples of issues that a title search may uncover could include outstanding liens against the property, unpaid taxes, property easements, unknown heirs, unauthorized signatures, mistakes in public records, invalid power of attorney, etc. Essentially, title insurance protects your (and your heirs') right to use and occupy the land.

Are there any Issues a Title Search May Not Uncover?

There are sometimes “hidden hazards” that even the most diligent of title searches may not uncover. There are certain hazards that may not arise until after the sale of the home is complete - sometimes not until years later. For example, the seller who signed the documents at closing could later be diagnosed as mentally incompetent, which would render his signatures unauthorized. Inaccurate information given on the part of previous owners may not be uncovered right away. Examples of this would be the previous owner could have incorrectly stated his marital status, resulting in a possible claim by his legal spouse. Also, any fraudulent or forged signatures, or mistakes made due to similar names (clerical errors), would be considered hidden hazards.

Why Do I Need Title Insurance and Is It Required?

In many cases, buyers are not required to purchase an owner's title policy. Lenders will almost always require a lender's title policy, however, so they can be sure that their investment will be protected. However, it is in your best interest to purchase title insurance. Title insurance protects your interest in a property, so you can rest assured that the home you purchase is in fact your own, and that you will not be held responsible for issues with your title that you did not cause.

How Much Does Title Insurance Cost?

While the actual costs of title insurance vary from state to state and closing to closing, title insurance remains one of the most affordable types of insurance available on the market today. Title insurance is purchased with a one-time premium when you close your home, so unlike other types of insurance, you do not have to pay a monthly, semi-annual, or annual fee. After you pay the one-time premium on your title insurance, your policy will remain in effect as long as you or your heirs have a vested interest in the property.

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Arrowhead Title, Inc.