If you're buying a home, your bank is probably forcing you to buy title insurance. But just because you have to buy it doesn't mean you can't save yourself some money by knowing a few of the basics. Title insurance protects the bank against mistakes made in a title search.
Title insurance protects the bank against mistakes made in a title search.
A title searcher, who should be licensed and bonded, checks on details such as making sure there isn't a lien against the title, or that the person you're buying the house from really owns it. An error made during this search could result in the bank collecting on the value of the mortgage from the title company while you continue paying a mortgage on a home you no longer own. Claims on title insurance are rare compared to other types of insurance, with the title industry paying claims equal to about 5.4 percent of operating income compared with more than 80 percent for property and casualty insurers, according to ALTA's figures. Common types of title insurance claims are for the cost of back property taxes that the title company missed in researching a sale, or the cost of a settlement with a neighbor whose new driveway or fence crept across a property line. Title insurance usually covers the amount of a mortgage, with the policy's value declining as the mortgage is paid off.