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What is Title Insurance?

Simply put, title insurance is a way to protect you from financial loss and related legal fees in the event of a defect in the title covered by your policy. Title insurance protects real property owners and mortgagees from future claims arising from any unknown title defects at the time of sale. Title insurance is an insurance policy designed to protect home buyers and mortgage loan lenders from losses due to imperfect or lost title.

A lender’s policy offers the mortgage lender protection against losses arising from any defect in title that only becomes known after the insured property has been financed. The property policy offers financial protection to the buyer of the home from covered damages resulting from any unknown defects in the title that existed prior to the purchase, which become known only after the acquisition of title to the property. Instead of title insurance, some private transactions may include a title guarantee, which is a guarantee from the seller to the buyer that the seller has the right to transfer the title and no one else has the title.

In fact, securities companies offer policies along with a title search, in which the real estate company ensures that the seller has the legal right to transfer ownership to you. To protect yourself from having to be held liable for title problems, you have the option to purchase owner’s title insurance, which is not part of the creditors’ policy. Unlike other types of insurance, your property policy only pays a one-time premium and your policy remains in effect for as long as you own the property.

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