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Understanding the Basics of Title Insurance and Why You (Probably) Need It

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At Mid-Coast Title Company, we know that buying a home is a dream come true for many Americans. But if someone comes along and contests your ownership of the property, that dream can quickly turn into a nightmare.

That’s where owner’s title insurance comes in handy.


What is title insurance?

Title insurance is a type of insurance that covers potential damages from errors in the ownership records of your home or property. In most cases, you purchase title insurance when you get a mortgage. It protects both real estate owners and lenders against loss or damage occurring from liens, encumbrances, or defects in the title or actual ownership of a property.

According to the Texas Department of Insurance (TDI), it also protects you from claims of ownership by other parties, as well as losses from problems that arose before you bought the property.

Issuing title insurance is a two-part process. First, the title company researches records to make sure there are no undisclosed heirs to the property, unpaid taxes, pending legal action, errors, fraud or other problems with the deed. Put simply, the title must be clean, verifying that the seller really does own the property and is free to sell it.

Next, the title company contracts with an underwriting company to issue an insurance policy that will pay for your defense if anyone challenges your title and compensate you for your equity if you lose.

What types of policies are there?

There are two types of policies – owner’s and loan.

The owner’s policy protects you against losses from ownership problems that arose before you bought the property, but that were not known at the time you bought the property, according to the TDI. For example, you could lose title to your property due to fraud, errors or omissions in previous deeds, or forgery of a previous deed. The owner’s policy protects the buyer from the covered risks listed in the policy.

The loan policy is issued to the mortgage lender. It protects the lender’s interest in the property until the borrower pays off the mortgage.

Why do you need title insurance?

Purchasing lender’s title insurance is a mandatory part of the mortgage process. The policy will repay the balance of your mortgage if a claim against your property voids your title. A loan policy covers up to the amount of the principal on your loan.

However, it’s often a good idea to buy title coverage for yourself as the homeowner. Title insurance can compensate you for damages or legal costs in a variety of situations.

A title defect that arises after a loan closing could, at the very least, mean a variety of legal costs — and, in a worst-case event, the loss of your property and the money you’ve put in it. And if you don’t have title insurance, you’re out of luck.

Can you choose your own title insurance?

You can choose your own title insurance company for both lender’s and homeowner’s title insurance. If you’re considering purchasing a homeowner’s policy for yourself, it makes sense to do your own shopping.

When shopping for title insurance, consider Your Hometown Title Co. – Mid-Coast Title Company Inc.

We’ve been serving Wharton County, Texas since 1972 as the successors to the Ingram Abstract Company, established in 1926.

With two convenient locations in Wharton and El Campo, Mid-Coast Title Co. is the only title agent in Wharton County that is wholly owned and staffed by Wharton County residents.

For more information or to get a quote today, contact the Mid-Coast Title Co. office nearest you or like us on Facebook.

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