Top Misconceptions About Title Insurance
When buying a home, title insurance can be a confusing topic. For many homeowners, especially first-time homebuyers, there are likely some common misconceptions, myths, and questions about title insurance. What does it cover? Isn’t it really expensive? Why would I spend additional money for title insurance protection?
The good news is we are here to help debunk a few of the most common misconceptions about title insurance during the home buying process.
Myth: There is Only One Type of Title Insurance
It’s commonly thought there is only one type of title insurance, and it is a blanket term that covers any title defects after closing. In fact, there are two types of title insurance with different coverages.
The first type of title insurance is lender’s title insurance. Lender’s title insurance is required when homebuyers are financing the purchase of a property through a mortgage. Lender’s title insurance protects the lender or bank if there is an issue or problem after closing that causes the buyer to lose the house in a property dispute.
Lender’s title insurance covers the loan amount in full, meaning the bank will get its money back. In other words, they are financially protected should things go awry after closing. The key to remember is lender’s title insurance ONLY protects the bank and does nothing to protect the buyer. That’s where owner’s title insurance is critical.
Owner’s title insurance protects you, as the owner, to the right to the home, even if ownership is questioned after closing due to a title defect such as a lost heir, property line dispute, or clerical error. Basically, if legal ownership is ever questioned, an owner’s title insurance policy protects you from expensive legal problems that could result in the loss of your home.
Myth: Title Insurance is a Monthly Expense
Unlike homeowner’s insurance, car insurance, and even life insurance, title insurance is a one-time fee paid at the time of closing. Monthly insurance policies are forward-looking, meaning they protect you from a FUTURE event. Title insurance, on the other hand, is backward-looking and protects you from a PAST event or issues that may arise that questions the legal ownership of your home.
Because of that difference, title insurance is a one-time payment made at the closing table and protects your property rights for as long as you own the home.
Myth: Buyers Aren't Responsible for Title Insurance
Some home buyers assume that title insurance automatically comes with the purchase of a property, either because it’s included in the purchase or it’s transferred from the previous owner. The truth is title insurance is the responsibility of the buyer to procure.
Myth: Title Insurance is Expensive
Purchasing title insurance is an easy process and rates are more affordable than you may think. In Pennsylvania, rates are set by the Title Insurance Rating Bureau of Pennsylvania and are based on the purchase price of the home. Rates vary, but to get an idea of what your investment would look like in Pennsylvania, a title insurance policy for a home priced at $180,000 would be $1,486 and for a home priced at $275,000, $2,028. Considering court fees could reach thousands of dollars – and more – during a property dispute, title insurance is an affordable way to protect your investment.
Myth: Realtors Choose the Title Company
When buying a home, your real estate agent is your go-to expert on the home buying process! They may have recommendations on who to use for title insurance, however as the consumer, you have the choice on who to use. While most title companies offer the same services – and rates are the same across the board – you can choose the company that offers the best customer service for your home buying process.
Your Local, Friendly Title Insurance Company in Central Pennsylvania
Contact Us Today
If you are in the process of buying a home, the team at Watermark Land Transfer is happy to answer any questions you may have about title searches, title insurance, closing costs, or anything related to your real estate journey. We are a full-service title insurance company offering customers the top-notch, concierge-level service they deserve.
Contact us today with any questions – we are ready to help debunk your misconceptions about title insurance!