What is Title Insurance?

By Barb Bartus, Sr. Mortgage Loan Officer

Buying or selling a home can be an exciting time. It can also be a bit confusing. Sometimes things feel like they are moving pretty fast, and sometimes some important things can go unexplained – like title insurance.

Title to a piece of property is evidence that the owner is in lawful possession of that property. In Michigan, the seller must convey marketable title to a purchaser.

Title insurance is a unique form of insurance. It protects the real estate owner and lenders against any property loss or damage they might experience because of liens, encumbrances, or the defects in the title to the property. Each title policy is subject to specific terms, conditions and exclusions.

Insurance for a car, life or health, etc., protects against future events and is paid with monthly or annual premiums. A title policy insures against events that occurred in the past of the real estate property and the people who owned it, for a one-time premium paid at the time of closing. There are no annual payments to keep your Owner’s Title Policy in force.

A title company conducts a diligent search of the public records for those documents associated with the property. Recorded documents are examined to determine if there are any rights or claims that may have an impact upon the title to the property. The title search may reveal the existence of recorded defects, liens, encumbrances upon the title such as unpaid taxes, unsatisfied mortgages, judgments, tax liens against the current or past owners, easements, restrictions or courts actions. Matters that are discovered in the search can be expected, resolved or distinguished prior to the closing of the purchase transaction. You are protected against any loss or damage resulting from recorded defects, liens or encumbrances that are within the scope of the coverage of the particular policy issued in the purchase transaction.

Purchasers and lenders need title insurance in order to be insured against the various possible title defects. The buyer, seller and lender all benefit from title insurance. In Michigan, the owner’s title insurance premium is customarily paid for by the seller. The lender’s policy is paid for by the buyer and is included in the estimate of closing costs.

With a title insurance policy, you as the owner, have an indemnity contract that will reimburse you for loss in the event someone asserts a claim against your property that is covered by the policy. In the event of a covered matter affecting your title, your title insurance policy may protect you in various ways including:

  • Defending your title
  • Bearing the cost of settling the covered matter
  • Paying you for the loss due to the covered matter

The peace of mind in knowing the investment you’ve made in your home is a safe one.