Harrell, Stoebner & Russell, P.C.
Now in Temple
and Killeen

Title insurance for real estate: What is it, and do you need it?

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Title insurance protects owners of real estate by paying them for financial harm they may incur because of problems with their ownership rights. The insured person pays a one-time premium that is fixed and regulated by the Texas Department of Insurance. The cost of policy is based on the property's value. Title insurance should not be confused with homeowner's insurance, which covers problems with physical damage to the property, not with ownership rights.

There is no law requiring you to purchase title insurance when you buy real estate. But if you have a mortgage, then your lender will make you buy title insurance that covers the amount of your loan, in order to safeguard the value of the collateral. If you own your property free and clear, then buying title insurance is your choice. In these respects it is similar to a homeowner's policy.

In simplest terms, a title insurance policy helps make sure that "you get what you think you are getting" when you buy real estate. More specifically, a standard policy insures against a long list of potential problems with title, including: (1) competing ownership claims to the property; (2) "encumbrances" on the property (mortgages, liens, easements, deed restrictions, etc.) not identified in the policy; and (3) right of access to the property (i.e. making sure the owner is not "landlocked"). For additional charges, an owner may purchase more coverage for various contingencies not covered in a standard policy. For example, you can insure that no buildings, fences, or other improvements violate city ordinances or interfere with the property rights of your neighbors.

Another benefit of getting title insurance comes before you even purchase your property. Prior to closing, the title company will search for problems with title to the property. If any are found, the title company will identify them in writing to the buyer and seller, who can work together to get the problems fixed before closing the sale. If the assistance of an attorney is required, the title company can refer the parties to an experienced real estate lawyer.

For many, a real estate purchase is the largest single investment they make in their lifetime. For this and many other reasons, anyone who buys real estate is well advised to buy title insurance to protect that investment.

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