Title Insurance – What Is It and Do You Need It?
When closing a real estate transaction in Kentucky, you will be looking at a long two to three-page document that shows all debits and credits for both sides of the deal. This settlement statement includes descriptions of what each amount is for. In most deals, title insurance appears. If the buyer is financing their purchase, there will be a line for a lender’s policy. There will also be a line for an owner’s policy, which is optional. No other line on the statement raises eyebrows more than this one. And it’s because it’s not always discussed much. So, let’s discuss what it is and if you need it.
Title insurance protects from loss related to ownership issues of a property. The title company will research the history of the property and you will ideally receive a “clean” title. This means you own the property and no one else claims ownership or has a lien against it (a lien means someone has a legal interest in the property). An example of a lien is: if you have a loan on your car, you can’t sell your car without paying off the loan.
Between your accepted offer and closing, the title company will check the ownership history of your home. You should expect a “clean title”, which means the current owner has a complete ownership stake without claims against it such as liens, creditors, or taxes due. Even if nothing comes up, it is possible that something that they couldn’t discover will pop up in the future. A claim that comes up later as a surprise, can mean serious legal costs and, worst case, loss of ownership. Purchasing title insurance transfers that risk to the insurance company.
The good thing is that title insurance is a one-time, upfront fee. It is also usually not more than a few hundred dollars. While your homeowner’s insurance protects you from unknown things in the future, title insurance protects from unknown things in the past. It is usually a good investment that will give you peace of mind for the entire ownership of your property. We always recommend purchasing an owner’s policy so that you will be able to enjoy your home worry free.
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