Common Myths About Title Insurance
In this article, we debunk some of the most common title insurance myths. If you are not familiar with title insurance, then we highly recommend checking out this title insurance post!
These fact vs. fiction topics are great for both realtors and homebuyers to have and to know.
Myth #1: You Do Not Get Full Protection with Title Insurance
Common title insurance myths number one goes to the implication that title insurance only provides minimal coverage. However, title insurance protects the homebuyer(s) in multiple ways concerning any defects that may be on the title of the property being purchased. Title issues that have been undiscovered for maybe months to years can be covered through title insurance. Therefore, keeping the homebuyer not responsible for any defects.
Myth #2: Title Insurance is Expensive and Requires a Monthly/Annual Premium
Title insurance is a one-time fee that you pay at closing when you purchase or refinance property and that is it. No monthly or annual premiums here. As far as the cost of title insurance, it is a very small percentage based on the purchase price of the home and it covers the property for the entire length of ownership. It’s a once and done purchase that will keep you protected for years to come.
Myth #3: There’s Only One Type of Title Insurance
Our third myth in this common title insurance myths article is that there is only one type of title insurance. That is incorrect. There are two types of title insurance. One type is owner’s title insurance and the other type is a Lender’s title insurance policy. Just like their names, the owner’s policy protects the owner and their rights to a property. A lender policy protects the lender until the mortgage is satisfied.
Myth #4: Homeowner’s Insurance and Title Insurance Are the Same Thing
They are not the same and they do not offer the same protection. Title insurance will protect a buyer’s right to ownership as well as the investment made by a lender. Meanwhile, homeowner’s insurance protects you and your home from damage or potential losses on the actual structure. They are not the same.
Myth #5: Homebuyers Do Not Get to Choose Which Title Company to Use
If a property is purchased with the assistance of a federally related mortgage loan, a homebuyer typically has the right to choose which title company to use. More information about this is under RESPA (Real Estate Settlement Procedures Act).
Myth #6: There’s No Point to Title Insurance
You may think that there is no point in purchasing title insurance because you’ll never use or need it. But hey, sometimes you should expect the unexpected during the homebuying process. According to ALTA, title insurance policyholders have filed over 730,000 claims to date (based on 2018 data). You never know if the title to the property could be compromised. Which is why title insurance is so vital.
Common Title Insurance Myths Debunked Conclusion
A myth is a “widely held but false belief or idea” (Oxford Languages) for a reason. Hence why we wanted to separate these title insurance falsehoods from the facts in this post. The biggest takeaway is that title insurance was designed to protect you, the buyer, from potential defects. And, that you will be protected for the entire length of home ownership. Which, in our opinion, is priceless.
Protect your largest investment today, your home, by contacting our settlements team today!