When you purchase a home, part of the dreaded closing costs is the title insurance. All that most people know about title insurance, if anything, is that it’s required when you buy property. In fact, this is probably the least understood type of insurance that exists.

What Does Title Insurance Insure?

Title insurance protects the policy holder from claims made against the property. The policy holder may be you, a mortgage company or both. It will insure that the property comes with a clean title without defects or encumbrances. It also protects you from claims against the property from others. Possibly a neighbor may claim that part of your property belongs to them. This will defend you against that inevitable lawsuit.

What’s a Defect?

When buying a property, a title search insures against unknown defects, which could be forged signatures, fraud, missing heirs and more. These defects could possible arise at any time, even though they did not show up during the title search.

What’s An Encumbrance

This could be a lien against the title which was against a previous owner, but one that didn’t arise during the title search.

What Does Title Insurance Cost?

The New Jersey Department of Insurance regulates the cost of title insurance. There is a formula which is based upon the selling price of the property.

Bottom Line

Almost every lender requires the buyer to purchase title insurance to protect their interests. The policy amount required is the amount financed. The policy does not cover the down payment amount, it’s recommended that you purchase the additional amount to protect your interests.

Did this scare you away from purchasing a home? I hope not. So if it didn’t, call us -Bunny and Art Reiman – Realtors.  We can help you find the perfect new home for you!

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