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Crash Course in Title Insurance

Every day, we do little things to protect ourselves and our loved ones. From buckling up before driving to locking doors before going to bed, the smallest of actions can go a long way towards keeping safe. Insurance provides similar protection – it’s why we invest money in auto and health coverage each month. While not as well-known as other types of insurance coverage, title insurance is just as important. It protects buyers and lenders from the financial losses that sometimes occur when defects or disputes arise during the home buying process.

Any time a buyer and seller enter into an agreement over the sale of a property, title insurance is needed. A title agent works to uncover any liens, claims, encumbrances, or conflicts that must be cleared up before property can transfer owners. Most real estate contracts require the seller to purchase an owner’s title insurance policy for the buyer. The amount of the owner’s policy will be the price the buyer paid for the property. The policy will include a description of title defects that are covered by the policy and a list of “exceptions” that describe the matters that are not covered by the policy. Although the seller usually pays for the buyer’s owner’s policy, lenders who finance the buyer’s purchase typically require the buyer to buy the lender a policy to protect the lender from title defects. Even the most minor of mistakes can have massive financial ramifications for the lender, so lenders often refuse to proceed without title insurance.

Should you need to make a claim, the title insurance covers any damages and costs associated with fixing issues up to the policy amount. For instance, imagine you bought a house only to discover there are extensive back taxes owed on the property. Without title insurance, you’d be stuck footing the bill for any property taxes owed. Fail to make those payments and you could lose your house. Title insurance helps catch these kinds of issues and ensures the new homeowner isn’t unfairly burdened by the previous owner’s taxes.

Title insurance is typically a one-time payment. Unlike your auto and health insurance coverage, you won’t be forced to pay monthly rates. Instead, your title insurance premium is paid in full at closing. Coverage typically runs about one percent of the purchase price of a property. This can vary from state to state, of course.

Ultimately, title insurance is an incredibly valuable tool that no new homeowner should proceed without. While digging into the details of title insurance might not be the most exciting task, doing so can mean greater protection of your investments. While it might not be the most fun purchase you’ll make in your lifetime, title insurance remains a must-have for home buyers.

Our team at Attorney’s Title Group can help you with all of your title insurance needs or any questions you may have. Give us a call today at 501-734-2233 or email atg@arkansasclosings.com.