What is Title Insurance?
“Title” refers to the legal ownership of a property. Title insurance is a California policy that new homeowners can take out to protect against claims from past occurrences on the property.
For example, if someone in California files a lawsuit claiming that they are still a full or partial owner of the property, title insurance gives the new homeowners some financial protection from this lawsuit. Title insurance also protects new homeowners who may receive claims from contractors who claim they were not paid for work they had done on the property before the new homeowners purchased the property.
California Title Insurance Policies
There are two different types of California title insurance: a lender’s policy and an owner’s policy.
A lender’s title insurance policy is used to make sure that there are no other liens or more senior liens against the property. Lender’s policies are required by all lenders and usually will insure up to the amount of the loan.
An owner’s title insurance policy ensures that no other person or entity can make a claim for the title to the property. An owner’s policy is an invaluable insurance policy and has a relatively low cost.
Is Title Insurance Required?
Buyers are only required to purchase a lender’s title insurance policy. The Truth in Lending Act and Real Estate Settlement Procedures Act (TRID) requirements do not require buyers to purchase an owner’s policy. We often find very little reason why buyers should not purchase an owner’s title insurance policy, especially when it can be purchased at a cheaper price with the mandatory lender’s policy.
California Title Insurance Protections
A comprehensive search of the property is required before a title insurance policy is granted to a buyer and lender. This search is used to uncover any current title issues and to reduce any property liabilities. Then, once a buyer purchases and takes ownership of the property, the title insurance will defend them against any litigious claims and serve to validate that the buyer is the new and rightful property owner.
How Much Does Title Insurance Cost?
The cost of title insurance can vary based on the loan amount, property type, the buyer’s credit score, and the size of the down payment. The average cost of title insurance is around $1,000 per policy, but that amount varies widely from state to state and depends on the price of the home. Title insurance fees can also vary on the property’s history (foreclosure, liens, etc.) that can warrant unusual title fees.
