Title insurance is one of the closing cost items on
the closing statement when a home is purchased. This insurance protects the
buyer from defects in the title that are not discovered until after the closing.
There are two kinds of title insurance--coverage that protects the lender for
the balance of the mortgage if the buyers have a loan, and coverage that
protects the buyers' equity in the property.
It is prudent to purchase owners' coverage because most of the title
problems that arise after a closing are not from a sloppy title search, but are
the result of inaccurate information in the public records. The ownership chain
goes back a long way, and fraud or misrepresentation anywhere in the chain could
mean big problems. Title insurance will protect you if a wife or husband did not
properly sign off on the ownership papers or if the property was sold as part of
an estate that was later disputed. Most people do not have to deal with the
title insurance company after the closing, but this coverage could save your
investment if a problem arises.