Title insurance protects both the lender and the homebuyer against the need to address defects with a property’s title, which may include:
Liens from contractors who worked on the property but were not fully compensated, unpaid homeowner’s association dues, or other outstanding debts.
Ownership disputes, such as claims from unknown heirs.
Encroachments.
Falsified or forged deeds, documents, and other fraud-related issues.
For instance, say you purchase a property from the estate of a deceased individual, and an unknown heir later asserts ownership, alleging that it was improperly sold to you. Title insurance can be invaluable here. The title search process would have likely turned up evidence of the heir before the transaction closed. However, if it didn’t, title insurance would assist in covering the expenses associated with resolving the heir’s claim.
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