What is Title Insurance and Why Do I Need It?

Title insurance is a one-time premium paid when you purchase property that protects the homeowner from title defects – legal issues which can prevent a property from being lawfully transferred or sold – for as long as you or your heirs own the property. Basically, it’s insurance against a property’s history, and it protects you against suffering financial penalty due to undisclosed issues with the property’s title.

Mortgage lenders will also require the buyer to obtain mortgagee title insurance for the mortgage amount to protect their first lien position should they need to foreclose on the property. In other words, a lender wants their investment in the property secured as well.

A big part of securing title to a property is to conduct a thorough search of the property’s history. The title company (such as Thoroughbred Title Services) will work to locate, prevent, and eliminate any risks or losses which may arise due to title problems, using public records to establish a clear chain of ownership and disclosing all identifiable outstanding claims against it.

Once an owner has title insurance, future claims made against the home will be paid for by the title insurance company rather than the buyer, including the legal defense costs of such a claim. In short, title insurance protects you against future claims and secures your hold to the property.

How is title insurance different from my homeowners policy?

	Title Insurance Policy	Homeowners Insurance Policy
What does it protect?	Ownership interests in the real property Against matters or faults that occurred *prior to* buying the policy	Against loss or damage to the home Against future losses that might occur during the policy period
When is the premium paid?	A one-time payment is due at time of home purchase	Paid annually for each year of ownership
How is the premium priced?	Most insurers charge the same premiums. Thoroughbred brought price competition to New York.	Competitively priced

Owner’s Policy vs. Lender’s Policy

Owner’s Policy: An owner’s policy is purchased in an amount equal to the purchase price and does not terminate when the mortgage loan is paid in full or refinanced. The owner’s policy is there to protect the owner’s equity in the property.

Lender’s Policy: A lender’s policy protects the lender up to the amount of their outstanding debt on a mortgaged property. The value of the policy decreases as the loan principal is paid down and expires when the mortgage is paid in full.