When purchasing a house, the subject of title insurance is bound to come up. But what is it, and who does it help?

Title insurance is a one-time fee that a borrower pays to guarantee that the property they’re purchasing has no claims held against previous owners. It can usually be broken down into two categories: lender and owner.

Lender title insurance is a way for the lender to protect their interest in the property if something were to go wrong. This type does not protect the borrower. However, owner insurance has the buyer’s interest in mind, protecting them from any previous claims on the property.

So if a buyer was looking at a newly built home, or looking into building their own house, do they need to spend money and time on title insurance?

Yes, they’d be smart too.

Just because a house no longer resides on a piece of land, or if no one had previously resided in the home, doesn’t mean that the property isn’t being held under a claim. Paying for title insurance is the best way to protect yourself from any unforeseeable problems.

A title search would quickly inform an owner if someone else had a right to the land previously because of a mistake made in a will or through document transfers. Title insurance could also help protect the owner against any liens a contractor or subcontractor may present when working on building a new house.

A lien is a claim from a business stating that they now have rights to a property because they haven’t paid for their supplies or service. This claim can be resolved after the business is paid and signed a lien waiver, which gives up their claim to the property.

Whether you’re building or buying a house, new or old, title insurance is an excellent way to protect you and your family from any problems that may arise during the buying or building process. And though it may seem confusing, having a good agency behind you, that understands title insurance and real estate, can help make the process more enjoyable.