Understanding Title Insurance
When you are purchasing a home or a piece of property, what you are really buying is the exclusive right for you (and your family if applicable) to occupy and/or use the property as you see appropriate provided that you abide by the town or cities code regulations. The right is a legally binding right and is typically consummated when the person you purchase the property you now own files an updated title (or deed) with the Registrar of Deeds or the county courthouse depending on where in Florida you live. The deed may however have claims asserted on it by others - prior owners, people who have worked on the property, creditors of prior owners, etc. - and these claimholders may challenge your ownership any time after you own the home.
To protect against this type of claim, you are encouraged to purchase 'buyers title insurance' which offers you protection from any 'defect' which may exist in your deed (or title) - anything which might offer others the opportunity to state that they have a legal right to say they are still part or full owners of the property which you now believe you own. Without the protection of title insurance, not only can your right to the property be challenged, but you could ultimately lose hundreds or thousands of dollars defending your right to the ownership of the property and in fact you could even lose the home (or land) that you've already spent thousands of dollars acquiring.
If you have taken 'owner's title insurance' you are protected from this - as the title insurance company will take action to clear up these issues or in a worst case scenario, pay for any losses you might suffer as a result of these issues. The best thing about owner's title insurance is that for a one time premium which you pay when you purchase a piece of property or a home, the policy remains in full force and effect as long as you or your survivors own the property.
A similar policy is issued to the person (or entity) that loaned you the funds to purchase the land or the home. A Lender's Policy is protection that is offered to the lender that protects them by any losses they might suffer as a result of any issues with the deed (or title).
Many borrowers ask why they would need title insurance if they were merely refinancing their mortgages - the answer is actually quite simple - the lender wants to verify that you have not incurred any additional liens on the property which would subjugate their position as the 'first' lien holder. For this reason though typically offered at reduced rate, title insurance is still required on a refinanced mortgage.
Another common question is often asked for people who are buying a home that is newly built - the theory being that since the home has never been owned before there should be no liens that could possibly be against it. This however is not necessarily true, as a builder owned the land that your home was built on and there is a possibility (however remote) that they may have used it as collateral on another loan, or that easements, liens or other items could cause future issues with your title may exist. Title insurance guarantees that you will be free of any losses from any issues that occur because of any of these instances.