Purchasing a new home represents not only a thoroughly exciting adventure, but also a huge investment. In all likelihood, you will pay more for your home than for any other asset you ever acquire. That is why you need to know that when title passes from your home’s previous owner to you, you truly own it yourself and no one else can claim an interest in it.

This is where title insurance plays such an important role. Forbes explains that this special insurance protects you against defects in your title. Actually, two types of title insurance policies exist: owner policies that protect homeowners and lender policies that protect mortgage companies and other real estate lenders. Your mortgage lender almost certainly will require you to purchase a lender’s policy before it will give you a mortgage. Your wisest strategy consists of purchasing an owner’s policy for yourself as well.

Title protection examples

Title insurance protects you against mistakes that occurred in the past with regard to your home’s clear title. Examples include the following:

  • A former owner passed title as a single person when (s)he was actually married.
  • A contractor filed a lien against the property that no one discovered at the time the owner passed title to someone else.
  • A former owner willed the property to one of his or her heirs, but no one knew the will existed when the deceased’s estate sold the property.
  • A utility company received an easement on the property but failed to record it.
  • Someone made a mistake in the property’s legal description on one of the previous warranty deeds.

Bottom line, if anyone ever disputes your clear title to your home, your title insurance company will defend you against such claim in court.