What is Title Insurance? When is it needed?

Title insurance is an insurance policy that provides peace of mind to a new homeowner that their ownership is guaranteed and protected to a certain extent. There are two policies of insurance:  An Owner’s Title Insurance Policy and a Mortgage Title Insurance Policy.

Owner’s Title Insurance

This type of policy is issued in connection with the sale/purchase of a new home.  Typically, the Seller pays for this policy unless negotiated otherwise.  The policy insures ownership rights to the new homeowner and guarantees that the seller has the right to sell the property. It also insures that all past owners or lien holders have properly relinquished their rights. Owner’s Title Insurance Policies can be upgraded to include additional coverages.  See Expanded vs Standard Coverage for more details.

Premium:  Insurance rates are filed with the State of Michigan and the cost is based on the sale price. An Owner’s Title Insurance Premium is paid for at closing and there is no annual or renewal fee.  The coverage provided will last as long as you own your home.

Mortgage Title Insurance:

This type of policy will be required by a mortgage lender if you are obtaining a mortgage loan to purchase or refinance your home. The policy protects the lender’s interest until your loan is paid off.  As the borrower, the cost will be paid for by you at closing. The premium amount is based on the amount you are borrowing and is issued at a lower rate than an Owner’s Title Insurance Policy.

Whether buying, selling or refinancing, title insurance will be playing a significant role in your transaction.  With title insurance knowledge you will be able to make informed choices that will benefit you in the years to come.  Learn more about what those benefits are by reviewing: The Importance of an Owners Policy.