When you are buying a home, there are so many forms and contracts and types of insurance that it can easily get confusing. So what is title insurance?
Basically, title insurance protects policy owners from any losses and risks associated with past legal defects related to the property. Title insurance can help protect circumstances including clerical errors, invalid legal procedures, unpaid taxes, unreleased mortgages, forgeries and undisclosed heirs. Since a deed does not prove that the seller is the owner of the property, title insurance can help protect your interests in legal conflicts and other unforeseen claims.
Title insurance policies function like a pre-paid legal agreement. You pay for the policy and your insurer agrees to provide you with legal defense along with reimbursement for financial losses caused by the defects that are covered by your policy.
There are generally two types of policies: standard and enhanced.Remember that a lender's title insurance policy is different from an owner's title insurance policy. A lender's policy protects the lender only up to the outstanding loan amount. The loan amount is usually less than the full worth of the property.