Title Insurance: Why It Matters & Why You Need It
When you are purchasing a home or property here in PA, you’ll see among the dozens of fees and charges something called Title Insurance. This one-time premium generates a lot of questions and confusion, with people often wondering if it is necessary.
What is Title Insurance?
Like other types of insurance, like homeowners’ or automobile insurance, title insurance offers protection against the unforeseen. Title insurance covers the property’s title and deed, protecting you from claims against the title and ensuring you have good title.
There are two types of title insurance: lender’s policy and owner’s policy. A lender’s policy is held by your bank or mortgage company to protect their interest in your home. In addition to the policy taken out for the bank, an owner’s policy protects you, the purchaser, from a defective title.
Potential Title Defects
Here in Pennsylvania, conveyance of real estate is usually done with a special warranty deed. This means that during a sale, the seller is only guaranteeing the title against defects during their ownership. This does not necessarily guarantee a clean title, as defects or claims to the property could have occurred prior to sale or without their knowledge. This can include:
- Mortgage on the property
- Judgment or tax lien on the property
- Right of way
- Unauthorized sale
While most of these issues should come up in a title search, on occasion they can be missed by the search or appear after you purchase the property. Title insurance protects the buyer from these types of claims.
Do I Need Title Insurance in PA?
If you are using financing to purchase your property, your lender will likely require you to take out title insurance on their behalf. If you are paying for your home with cash, the choice is yours whether you take out title insurance or not.
While it might not be required, taking out title insurance for your new PA home makes good sense. Like any other insurance, the true value is in the protection against the unexpected or unknown in what, for many, may be the largest purchase of their lifetime. If there ever is a claim against your title, the insurance kicks in and will cover all legal fees and costs for defending the title and making it clean. For most homeowners, this assurance is well worth the premium.