BUSINESS FUNDAMENTALS
INSURANCE
Protection for All WHAT IS TITLE INSURANCE AND WHY ARE YOU BUYING IT?
by Eric Fontanot
T
he home-buying process is comprised of several moving parts, but few are as misrepresented and under-appreciated as title insurance. In essence, title insurance protects you against anything that could’ve happened in the past regarding the ownership and finances of a property. It identifies, addresses, and corrects any potential title defects that could prevent you from taking ownership of a piece of property. This service has been an essential element of the real estate industry for decades. It’s designed to protect the buyer, seller, and the mortgage lender in one fell swoop. So, why don’t more people understand exactly what it does if it’s greatly
beneficial to all parties involved in real estate transactions?
that something could happen in the future rather than what happened in the past. Furthermore, since regular insurance seeks to actively mitigate against that future risk, you have to pay for that protection every month. In contrast, title insurance is a one-time service to investigate potential title defects. You only pay a one-time fee, and it’s typically rolled into the closing costs. So, title insurance assumes that everything the seller of the property tells you is correct, but it’s a good idea to be protected against unforeseen circumstances. Hence, there’s a need for both traditional and title insurance.
HOWDOES TITLE INSURANCEWORK? As part of the title insurance process, title companies conduct deep dives into the nooks and crannies of public records. These title searches critically examine the history of properties to ensure that everything goes according to plan when buyers and sellers sign the final closing documents. As you might’ve noticed, the title insurance process runs counter to regular insurance, which operates under the assumption
52 | think realty magazine :: april 2020
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