When you plan to buy a home in real estate, you should consider the most important factor in the process, which is the title insurance. It is essential that you understand what it means and how it works prior to finalizing the home buying process.

In the past years, the title insurance as a means of guaranteeing good and marketable real estate title has surpassed the use of abstract titles. Before, property ownership was proven by a record called abstracts, which traces the ownership of property. In an abstract, the only guarantor of its accuracy is a person, usually not even a lawyer who makes them. Eventually, most lenders have decided that they wanted more security, which started the use of the title insurance and has become increasingly popular.

The title insurance is just the same as any other insurance policy, but it offers far more security for the homebuyer and the mortgage lender than an abstract does. There are several forms of title insurance but the most common are those intended for property owners and lenders. The policy for the lender is usually for the mortgage amount and the policy for the homeowner is for the purchase price of the property.

To know more about the title insurance, read on:

1. For the mortgage lender, the title insurance guarantees that the property they are issuing a loan is free from other liens that could take priority over a bank lien. The title insurance company helps the lender in ensuring that it has a lien position on the property.

2. The cost of the insurance is related to the purchase price of the home where the policy is written. The higher the sales price, the more expensive it will be because of the risk that the title company will assume.

3. In case problems occur, the company who wrote the title insurance will investigate. It works just like any other insurance policy; the owner of the policy files a claim, the company investigates and reviews them and then follow a course of action depending on the nature of the claim.

4. The risks that a title insurance policy covers include, forced removal of present structures, survey irregularities, forgery or duress, claims due to fraud, unregistered easements and rights-of-way, lack of vehicle or pedestrian access to the home, zoning and set back non-compliance or deficiencies. Generally, for a risk to be covered it has to be in existent as of the date of the policy. Like any other insurance, there are risks that are not covered, such as environmental hazards and native land claims.

5. For a buyer, the title insurance coverage remains in effect as long as the purchaser insured owns the title of the land. Several policies cover those who are recipients of the title due to purchasers’ death, or family members to whom the property is transferred for a nominal consideration.

6. A policy that covers a lender will remain in effect as long as the mortgage remains on the title. The lender is insured in the event that it suffers actual loss or damage with respect to a certain risk covered by the policy. The coverage is usually up to the principal amount of the loan.

7. The premium is paid once at the time of purchase. Some policies cover both the buyer and the lender automatically and some cover both for a minimal additional fee.

8. The title insurance ensures of on time closing. In the event that an issue regarding the title arises, the insurance company covers the legal expenses and fees with defending the insured’s title and fees in case of loss.

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