What is Title Insurance? A Basic Overview.

Title insurance is a form of indemnity insurance that protects lenders and homebuyers from financial loss that could be sustained from defects in a title to a property. The two basic types are The lender’s title insurance, which the borrower purchases to protect the lender and the other type is the owner’s title insurance.

A title search is completed before title insurance is issued. This is an examination of public records to determine and confirm a property’s legal ownership and determine whether there are any claims to the property. The goal is to pass “clear title”, free of any encumbrances or claims, to the new purchaser.

Title insurance protects against loss or damage occurring from liens, encumbrances, or defects in a property’s title that were unable to be detected during the title search. Some common claims that could subsequently be filed against a title are back taxes, liens, conflicting wills, forgeries and / or survey disputes. Unlike traditional insurance, which protects against future events, title insurance protects against claims for past occurrences.

Almost all lenders require the borrower to purchase a lender’s title insurance policy (usually detailed in the lender’s closing costs).  A lender’s policy only protects the lender against loss.  Buyers, at closing, typically have the option of purchasing an owner’s title policy that helps protects them from financial loss.

Since title searches are not infallible and an owner of real estate remains at risk of financial loss, it is wise to purchase protection in the form of an owner’s title insurance policy.

A basic owner’s title insurance policy typically covers the following hazards:

• Encumbrances or judgments against property
• Flawed records
• Property border disputes
• Encroachments
• Easement disputes
• Forged documents
• Third-party claims
• Errors in recorded documents
• Incorrect property deed

Title insurance costs in South Carolina range from 0.5% to 1% of your home sale price. It’s a one-time fee, and the coverage lasts as long as you or your heirs own the property.

The legal costs to defend your title from any one of the title defects mentioned would far outweigh the cost of title insurance, thus making it a sensible purchase.

Gena Glaze