When buyers purchase a house, they assume the seller has the right to sign over the property. Unfortunately, there is always a chance that the sellers do not own the house free and clear. As a result, buyers may find themselves out of a home.
Title insurance assists buyers and lenders should questions arise about property ownership.
Title insurance protects financial investments
Home titles represent people’s right to ownership, and a deed documents this ownership. Sometimes sellers forget about old tax liens and long-lost co-owners, or they might not have known about mistaken inheritances. All these things interfere with the sale of a home and cause lenders and buyers to incur additional expenses. Title insurance protects the financial investments of both lenders and purchasers by covering these expenses and lost assets.
Buyers and lenders may purchase title insurance
There are two types of title insurance available at real estate closings:
- Lender title insurance – Homebuyers pay for these policies. They cover the bank’s legal fees when other parties claim ownership and when purchasers stop making mortgage payments because they no longer own the home.
- Owner’s title insurance – Pays for a buyer’s legal expenses if other parties sue for ownership
Connecticut does not require either party to buy title insurance, but when lenders do purchase insurance, buyers must acknowledge that the lender’s policy does not cover the buyer’s legal fees.
Home buyers should purchase optional owner’s title insurance to protect their financial investment in case ownership or title concerns arise in the future.