Discover the ins and outs of title insurance and why you need it.

Whether you’re buying, selling or refinancing a home, chances are you’ll encounter title insurance. For most of us, real estate transactions are few and far between and title insurance is not well understood. Here are answers to five common questions on this type of insurance that can protect you financially.

What it is title insurance and what does it protect against?

Title insurance covers past title problems that come up after a home is bought or refinanced. It’s designed to protect homebuyers and lenders from financial loss due to a property title with unknown defects.

Title defects can include things like:

• Outstanding liens against the property
• Undisclosed heirs to the property
• Conflicting wills
• Unpaid back taxes
• Recording and filing errors
• Fraudulent transfers of ownership
• Errors and omissions on the deed

A standard step in property transactions is a title search done by an insurer before issuing a policy. The search includes a review of public records to see if there are any title concerns such as court judgments, mortgages, divorce decrees, wills or other such issues.

Defects revealed during a title search typically need to be resolved before the home sale can be completed. Alternatively, an insurer might issue a policy but exclude a defect from coverage.

Who needs title insurance?

Buyers and lenders can opt to get title insurance.

For owners, the policy provides protection against the appearance of past title or ownership after the purchase.

Lenders, who also have a financial interest in the property, almost always require title insurance. The coverage serves the same purpose as the owners’ policy – to protect the lender in case an ownership problem arises after the deal closes.

Who pays for title insurance?

The party picking up the tab for the current homeowner’s title insurance varies from state to state. In Michigan, the seller typically pays, though the responsibility can sometimes shift to the buyer.

The lender’s title insurance policy is paid for by the buyer.

As with any other insurance product, you can shop around for the best price. However, lenders can require the use of a specific insurer.

How much does title insurance cost?

Premiums for title insurance in Michigan are based on the purchase price of the home. Owner’s policies are typically 0.4% and the lender’s policy can be 0.1%.

The average cost of both an owner’s and lender’s policy is $1,072, according to Anytime Estimate.

How long does title insurance remain in effect?

Owner’s title insurance remains in effect for as long as you own the property. In some cases coverage may extend to heirs of the property.

A lender’s policy remains in effect until the mortgage is paid off. In the case of a refinancing home loan, a lender will likely require a new policy.

The State of Michigan offers a wide array of information on title insurance.

Turn to Consumers for your home loan

At Consumers, we offer many kinds of home loans that can help you get into the home of your dreams. Plus, we’ll help manage the process of getting title insurance. Ready to start the mortgage pre-approval process? We can help!

Consumers helps thousands of members finance land, first and second homes, and home improvement projects each year. We’d love to help you with a mortgage or home equity line of credit; contact us online or call us at 800.991.2221.