Title insurance protects homebuyers and lenders from damages caused by a bad title. Most policies provide protection against back taxes, outstanding liens against the property, conflicting wills and other common claims filed against a title.
While a title search can help identify issues before closing, title insurance is still recommended because it protects buyers and lenders against any deficit in the title that causes substantial losses. Both the borrower and lender have a policy, but who pays for the policy varies by county here in Florida. Still, it often can be negotiated as part of the transaction.
The owner’s title policy
While lender title insurance is often required, the owner’s title policy could be optional. Nonetheless, it is a smart move to protect what is often the owner’s most significant investment. Owner’s title policies can help with the following:
- Public record errors
- Forgery
- Boundary disputes
- Unknown easements
- Unknown liens
- Unpaid HOA fees
Generally speaking, it lasts as long as you own the property. Protecting real property against other ownership claims is its primary benefit. The cost is based on the value of the real property.
Why does the lender need a policy?
Lenders do everything their power to minimize their risk. This policy ensures that the lender has first lien if there are unpaid property taxes or foreclosure. A new lender’s policy is needed any time the owner refinances their loan, but the cost goes down if the owner has built up equity in the property — a smaller loan requires less financial protection.