Title Insurance

Published: | Updated: June 16, 2016

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Definition - What does Title Insurance mean?

Title insurance is a type of indemnity insurance that protects against financial losses due to problems with property's title. It typically charges a one-time fee for coverage, usually when the property title changes hands. It often comes in the form of lender's or owner's title insurance.

Insuranceopedia explains Title Insurance

Mortgage lenders often use title insurance to protect their investment. They usually require the borrower to buy title insurance as one of the conditions for their loan. That’s because if the borrower cannot pay their mortgage, eventually the lender will seize the property and try to resell it. However, if the borrower fails to pay bills to other parties, the latter might take a lien against the property. The title insurance would pay off these liens so the lender can sell the property.

A buyer might also want to buy title insurance in case the seller hides problems with the title. That way, if the buyer runs into any surprises, such as a hidden lien against the title, the title insurance would cover their loss.

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