Purchasing title insurance is an essential step in the homebuying process. Oftentimes, many mortgage lenders will even require that the buyer has a title insurance policy as a stipulation for receiving a loan. When you buy a title insurance policy, you will learn that it is just a one-time cost without additional monthly premiums.
This may lead you to wonder, ‘How long will my title insurance last if I’m not constantly paying for it?’ A completely reasonable inquiry! The longevity of your title insurance policy will depend on what type of policy you purchase. Our team at True Concept Title reviews these different policies and provides an answer to how long they will last.
Why is Title Insurance So Necessary?
If you plan to invest in real estate in the near future, it’s important that you select a title company to conduct a thorough search on the history of the property to look for any ‘clouds’ on the title. This will verify that the seller is the legal owner of the house and therefore has the legal right to sell the property to you.
A title company like True Concept Title will conduct a thorough investigation of the title while also helping you with the closing process. However, situations may arise after purchasing the home that reveal public record errors, third parties claiming ownership of the property, and more. This can lead to incredibly costly legal issues.
The title company who you purchase insurance from will assume responsibility to resolve any title issues for you.
Policy Types and the Length of Their Terms
There are two types of title insurance policies that serve different purposes.
- Lender Policy
- Property Owner’s Policy
A lender policy, also known as a loan policy, is the kind of title insurance that will be required by your lender in order for you to receive a mortgage loan. This kind of title insurance protects the lender’s investment in the property through the mortgage.
If a problem ever arises with your rights to ownership, a lender policy will protect your lender from losing any money from the mortgage loan and guarantees they will receive payment for the unsettled balance.
This type of policy lasts until the mortgage loan is paid off. If you have a 30-year mortgage on your home and live in that house for the full 30 years, then your lender policy will last – you guessed it – 30 years. If you’re able to pay your mortgage off early, the insurance will end at the time of payoff.
If you sell your home before your mortgage is paid off, you still have to pay the remainder of what you owe. This is typically done at closing, and then the lender policy ends.
In the case you decide to refinance, the lender policy will terminate along with the previous loan. However, you will need to purchase a new lender policy for the new loan.
Property Owner’s Policy
The previously described lender policy protects your mortgage lender, but it does not offer personal protection for you as a homeowner. A property owner’s policy is equally as important as a lender policy for protecting your own title interests. Your lender may not require you to buy an owner’s policy, since it does not affect their own assets.
With an owner’s policy, your title company assumes responsibility under any circumstance that you face problems with your home’s title. This policy will last the entire amount of time that you own the property.
If you own a property with an owner’s policy for 30 years and decide to sell, the policy will end at closing. If you pass away while you own the property, the title policy will transfer to your spouse or children and last until they decide to sell the house.
Learn More > How Long Does It Take to Get Title Insurance?
Cover Your Interests with True Concept Title
When buying a home, it’s important that you purchase both kinds of title insurance to protect your assets and satisfy the requirements of your lender. Fortunately, these policies are both one-time costs that last as long as you own a property or owe money to your lender.
If you are planning to purchase real estate in the United States, contact our team at True Concept Title. Our experts are licensed across the nation and can help ensure your homebuying process is smooth and seamless. You won’t regret making the right choice in title.