Debunking The 5 Most Common Title Insurance Myths

For some reason when it comes to title insurance, many people are misinformed. And when it comes to making one of the biggest purchases of your life, you definitely don’t want to be believing the misconceptions. This is why we are debunking the 5 most common title insurance myths.

Myth 1: Title Insurance is the Same Thing as Homeowners Insurance

This myth can’t be any further from the truth. Title insurance protects the buyers right to ownership as well as the lender’s investment. Homeowners insurance protects your home from damage or loss to the structure of the home.

According to First American, “Title is the legal right to use or own property and title insurance protects you from legal challenges to your title. It’s different from homeowners insurance, which protects against future property damage that may be caused by an event like a storm or fire. Title insurance safeguards your property from hidden problems with your ownership that may be lurking in the property’s past.”

Myth 2: Title Insurance is Very Expensive and You Have to Pay it Monthly

Nope! Title insurance is actually a one-time fee that is paid during closing when you buy or refinance a property. There are no monthly or annual payments. When it comes to cost, it’s actually very reasonable. It’s a small percentage of the cost of your property. But the best part about it is that it gives you the peace of mind you need to know that your property is protected from any legal challenges to your title. That’s priceless!

Myth 3: Title Insurance Doesn’t Give You Full Protection

When it comes to owning a property, title insurance is SO important and one of the main reasons is because of the protection it gives you.

First American explains this further by saying, “An owner’s title insurance policy covers 10 to 33 different title problems (depending on the policy type) that can impair your ownership. The policy also covers defense costs, which means that the title insurance company will pay for the legal fees to defend your title.”

You may be asking yourself, when would I really need this protection? I’m buying a new home nothing can be wrong…or I am inheriting land from family. Well, check out these examples from firstam.com:

• “You may not legally own the property you paid for because of fraud.
• Someone else may still have an ownership interest in your property because they never signed a deed to transfer the property. This could happen if your property was previously owned by a married couple, but one spouse did not sign the deed when the property was sold.
• There may be liens against your property, like unpaid taxes or a child support judgment against a prior owner of the property. Even if a lien is for the debt of a prior owner, the lien stays with the property until the debt is paid, becoming a problem for future owners.
• There could be document errors that affect your ability to sell in the future. For example, your deed may not have been properly notarized or witnessed.

Myth 4: There’s Just One Type of Title Insurance

Actually, did you know there are two types of title insurance? The first is an owner’s title insurance policy. This is the policy that protects the owner(s) of the property and their right to that property. The second is a lender’s title insurance policy. This type of policy protects the lender that is loaning the money and stays in effect until the mortgage is paid in full. Both serve their own purposes and are extremely important.

Myth 5: Homebuyers Can’t Choose the Title Company They Work With

This is one of those myths we hear all the time! In most cases, the buyers can absolutely choose which title company they want to work for. And oftentimes, they decide this based on recommendations from their agent, lender or family and friends. According to BestLawyers.com, “The accepted practice in real estate industry is for the buyer to submit an offer to purchase a property either alone or through an agent. The buyer will then select a title company. However, if the seller or if the agent representing the seller is not comfortable with the title company that the buyer has selected or has a strong opinion on where the closing process should be done, then the seller can counter the buyer’s proposal and suggest an alternative.”

It’s very important to pick a title company that can meet your unique needs, is reputable, understands the ins-and-outs of the real estate industry and focuses on exceeding client’s expectations.

NOT A MYTH—Velocity Title is The Best Pick for Title Insurance

Voted the Best Title Company in Central Maryland for 2024 by What’s Up Media, Velocity Title supports the real estate industry with a comprehensive line of title services that add value to each and every transaction. With a focus on the best CUSTOMER EXPERIENCE, Velocity Title incorporates leading title TECHNOLOGY and EXPERTISE into every transaction—enabling the final step in the home buying process to be EASY, EFFICIENT and INFORMATIVE. To learn more, visit our website or contact us today!