Common questions involving title insurance are: What is it? Why is it useful? Who needs it? These inquiries are especially important to know if you are in the process of purchasing a new home! You wouldn’t want to find your dream home, close the deal and then end up being liable for the previous owner’s mistakes.

The first thing to point out is that there are two different types of title insurance. Both are equally as important but knowing how to distinguish them can make all the difference.

Lenders Title Insurance is purchased to protect the lender and the amount of the loan for your mortgage. This becomes useful if there are any problems with the title that can affect your loan. It is important to know that this type of insurance does not protect you, the homebuyer.

Owner Title Insurance is what you’d purchase to protect yourself. When the title to the house is signed over to you, this transaction is giving you legal ownership of the property. Key point: Along with any prior issues. This means if the prior owner didn’t pay their taxes or had an addition built, but didn’t pay the contractors, you can now be sued and liable for those debts. Unless you have title insurance to protect you from these potential risks!

The reason why title insurance is so useful and important is that even though there is usually a thorough investigation into public records of the home, there are still defects that can remain uncovered such as unknown liens or easements. Every homeowner needs title insurance for this purpose. The most common analogy used is you purchase car insurance for the “what if I get into an accident? I want to be protected”. The same thing is applicable to purchasing a home. Protect yourself and your investments!