Title insurance is a type of insurance policy that works a little differently than homeowners insurance and auto insurance. Rather than protecting you against future events (car accidents, fires, floods, etc.) title insurance protects against losses from events that occurred in the past but are discovered in the future. There are two types of title insurance: lender’s policies and owner’s policies.
Both policies protect against financial loss or damage caused by liens, encumbrances or other claims to the property. The difference is who is being insured – the lender, or the owner.
Lender’s Policy
A lender’s policy is typically required by the lender any time a property is financed or refinanced. It is a one-time payment that is part of your closing costs and it provides coverage for the full life of the loan. Unlike most other forms of insurance, there is no monthly premium to pay.
Owner’s Policy
An owner’s policy is typically acquired at the time of purchase. It is a one-time payment that provides coverage to the owner(s) of the property for as long as they retain that ownership. Like the lender’s policy, the owner’s policy does not require a monthly premium.
It is important to note that although purchasing an owner’s policy is common and encouraged, it is not required. Buyers who opt not to purchase an owner’s policy will not receive the protections it offers.
What Does the Title Insurance Process Look Like?
It starts with a title search, which is an examination of the property’s title history to discover any issues related to a variety of situations, including:
- Prior liens, including mortgages/deeds of trust that have been paid off but not yet released
- An outstanding interest of prior owners or their relatives
- Judgments from prior owners that have not yet been paid
- Tax liens
- Fraudulent deed transfers
During this process, there likely won’t be much needed from you. If any issues are found, Rocket Close investigates and works to resolve them so that your title can be cleared and title insurance can be issued.
