What is Title Insurance?
Title insurance protects real estate owners and lenders against any property loss or damage they might experience because of liens, encumbrances, or defects in the title to the property. Each title insurance policy is subject to specific terms, conditions, and exclusions.
Who needs it?
Buyers and lenders need title insurance in order to be insured against various possible title defects. The buyer, seller, and lender all benefit from issuance of a title insurance policy. Because title insurance protects both home buyers and lenders, there are two types to suit the different needs:
A lenders policy is generally required when a lender issues a mortgage loan. The loan policy is usually on the dollar amount of the loan and it protects the lender's interest in the property should a problem with the title arise. It does not protect the buyer. The policy amount decreases each year and eventually disappears as the loan is paid off.
An owners policy, purchased at closing, provides coverage for the homeowner. It is usually issued in the amount of the real estate purchase and is valid for as long as the owner (or heirs) have an interest in the property. Only an owners policy fully protects buyers should a covered title problem arise. Possible hidden title problems can include: errors or omissions in deeds, mistakes in examining records, forgery, and undisclosed heirs.
Who pays for title insurance?
In Indiana, buyers usually pay for the lender's title insurance costs, while sellers pay for the owner's insurance premiums. But this guideline isn't set in stone- if you're negotiating with the seller, you could divvy up these expenses.