One of the ways you can save money on your closing costs is by shopping for a title insurance provider, rather than using the one offered by the lender. Title insurance protects against any potential problems with the title on your property. Lender's policies are designed to protect the lender, while owner's policies protect your interest in the home.

The Need for Title Insurance

Since title transfers are handled and recorded by humans, mistakes can occur, and you could end up purchasing property that legally belongs to someone else, even after a clear title search. Title insurance will help cover a loss if someone should have a valid claim to your property. However, if you do not shop carefully for your policy, you could end up with nowhere near enough coverage.

Common Title Problems for Which You Need Coverage

If you choose to purchase your own owner's title insurance coverage, there are certain types of title problems that you want to seek coverage for. One is fraud and forgery. Fraud or forgery on a title can be difficult to ascertain during a typical title search, but they can cause you a tremendous amount of headache after you purchase your home. A title insurance policy can help pay for defense against these types of attacks if you should be asked to go to court. It will also pay any claims that are proven valid in court.

Another type of coverage to look for is conflicting will coverage. If a new will or deed surfaces indicating that the home you just purchased actually belonged to someone other than the owner you purchased it from, your claim to the home could be in jeopardy. If you are taken to court, you will face heavy legal fees. The claim to your property and the fees you have as a result of the court battle will be paid by your title insurance policy if you have conflicting will coverage.

A third type of coverage to look for is missing heir coverage. The property you have purchased could actually belong to an heir of the owner of the original estate who was unknown to the owners you purchased the property from. This missing heir could legally be entitled to a share of the property's value, and title insurance will pay these claims if they should arise.

What Is Excluded from Most Policies

Like all types of insurance, title insurance usually carries some exclusions. If any problems were found on the title search, these are usually excluded from the policy. Also, most standard title insurance policies do not cover problems like identity theft or land intrusion that could cause there to be a title problem after you purchase your home.

Keep in mind that you will be required to purchase a lender's title insurance policy in order to get a mortgage, but you may not be required to purchase an owner's policy. The only way to protect your interest in the property is to purchase the owner's policy. This is not a huge expense, though, because most title insurance providers will include an owner's policy with the lender's policy for a relatively small cost.