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Title Insurance Policies: The Key Terms Explained

Monday, October 3, 2022

When purchasing a home, you need to understand the importance of title insurance.

Should property ownership come into question at any point, title insurance protects against any financial losses that may result for the homebuyer or mortgage lender. In this post, we're going to discuss some key terms you might see when buying title insurance.

It's important to shop for title insurance before buying a home. It's also important to understand the types of title insurance policies and the terms listed therein. Keep reading, and you'll have everything you need to know to get the right policy in place.

Types of Title Insurance Policies

There are two basic forms of title insurance: lender's title insurance and owner's title insurance. 

A title could come into question for various reasons - fraud, forgery, flawed records, unrecorded easements, etc. Before securing a mortgage, a homebuyer will purchase lender's insurance to protect the lender from financial loss due to any of the above property disputes.

An owner's title insurance policy is either purchased by the buyer or seller. It protects the buyer from financial loss due to title disputes that began before they purchased and/or occupied the home.

Why You Need Title Insurance

While owner's insurance is optional, your mortgage lender will usually require you to purchase lender's insurance before giving you a loan. If you opt out of owner's title insurance, which may cost anywhere from $500 to $3,500, you're leaving yourself vulnerable to the consequences of a title defect.

For example, say you bought a home and later discovered that the previous owner failed to pay their property taxes. If you have title insurance, you'll be financially protected. If not, you'll be on the hook for those back taxes.

What's Covered Under Title Insurance Terms?

When you close on a home, your realtor will perform a title search to find any title disputes on the home. With title insurance, you'll be protected against:


Foreclosed properties are inherently risky. For this reason, your realtor should investigate the property's title before you agree to purchase it. Even so, there could be things missing from the record that title insurance will protect you from.


When banks or property servicers (plumbers, construction, etc.) aren't paid by the previous homeowner, they may have property liens. These are rights to assets used as collateral until a debt is paid off. Title insurance clears you of any financial responsibility due to liens.


As a buyer, you may sometimes run into issues that affect the size and value of your new property. A neighbor may have built something on the property that you don't want there (encroachment), or a utility company may need to access your property (easement).

What title insurance does here is cover any repairs needed to eliminate encroachments and/or easements.

Shop for Title Insurance That Helps

Now that you understand what title insurance policies do to protect you and your lender, it's time to shop for title insurance that helps. At Heartland Abstract, we look out for our customer's best interests by putting the choice in their hands.  

Visit our site to learn about different title insurance policies and choose the one that works best for your needs. If you have any questions about us or our services, don't hesitate to contact us.

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