Can I Buy Title Insurance After Closing?

Being handed the keys to a new home is a giant moment in any person’s life. But once the papers are signed and the house is yours, you want to make sure your property is safe and secure. Many homeowners look to title insurance to help solidify that feeling and protect them from claims they never expected.

But can you buy title insurance after closing?

In this article, we’ll cover what title insurance is, how it differs from homeowners insurance, why owner’s title insurance is important (as well as reasons you may choose not to purchase it), and whether it applies to new construction. 

What is Title Insurance?

Title insurance is a policy that protects homebuyers from financial losses caused by third-party claims regarding the ownership of their property. A third party can be anyone outside of the property owner. Even after you have signed the papers on the house, you can still purchase title insurance to protect your home.

There are two common types of title insurance: lender’s title insurance, owner’s title insurance. Lender’s title insurance protects the financial interest of the company issuing the mortgage. Owner’s title insurance is generally paid for by the seller and equates to the selling price. The owner’s title insurance is only paid one time and is good for the entire time the owner or an heir owns the home.

As the property goes through the mortgage process, searches occur to make sure the property has a clean chain of titles. This chain will trace back to the original owner of the property and document the validity of each transfer of ownership while making sure no gaps, disputes or conflicting claims occurred.

A one-time fee on title insurance can save both parties thousands in administrative fees to protect against claims of previous occurrences.

Is Title Insurance the Same as Homeowners Insurance?

While some homebuyers may conflate title insurance with homeowner’s insurance, they are not the same. Each protects the owner in different ways. 

Where title insurance is a one-time fee that covers you from liabilities that you might not have originally been prepared for, homeowner’s insurance covers you from events that take place while you’re living in the home and is paid monthly, quarterly, or annually. This could include damages inside of the home, storm damage, theft or robbery, or personal liability to injuries that occurred to someone at the home.

An escrow or closing agent generally begins the process of purchasing title insurance at closing where an owner’s and lender’s policy are drawn up together. If the purchase happens after closing, you can visit a highly regarded title company to begin the process. This will ensure future protection against claims. 

What Does Title Insurance Protect the Policyholder Against?

Title insurance claims may contain a variety of issues, such as: 

• Back taxes
• Clerical issues or errors
• Improperly filed paperwork
• Pre-existing liens
• Easements
• Probate issues
• Judgments
• Mechanic’s liens
• Unmarketable titles
• Fraud or forgery
• Inheritance issues

Without title insurance, you run the risk of exposing yourself to a title defect. This could mean paying outstanding property taxes or risking losing the property to the taxing entity. 

If you’re purchasing a previously foreclosed property, doing so without title insurance could put you at risk of paying a number of outstanding issues that were tied to the previous owners.

Buying title insurance is also an important step for real estate investors seeking to refurbish and flip a home to a new owner. This will block the investor from any unforeseen issues that could come from a foreclosed home or an older house in need of repairs.

These issues can arise years after the purchase of the home is made. Not having title insurance puts you at risk of paying for the gaps in coverage. With title insurance, you have the peace of mind knowing you are fully insured with the property.

What Are the Disadvantages of Title Insurance?

The primary issue homeowners cite with title insurance is cost. Title insurance can be expensive. Depending on the state you live in, the insurance provider and level of coverage you select, and the purchase price of the home, owner’s title insurance can range from a one-time $500 to $3,500 fee at closing.

Here are some other considerations associated with title insurance:

COVERAGE LIMITS

Title insurance doesn’t cover everything. As mentioned, it typically protects against past discrepancies in the property’s title, like forgery, errors in public records, and undisclosed heirs, but it may not cover issues that arise after the purchase date.

NOT A PREVENTATIVE MEASURE

Title insurance does not prevent legal disputes. Instead, it provides financial compensation if such disputes occur. This means problems can still arise that may require legal intervention.

OVERLAPPING COVERAGE

In some cases, aspects of what title insurance covers might overlap with other types of legal or insurance protections, potentially making the additional expense seem unnecessary if adequate safeguards are already in place.

RARE USE

Many buyers purchase title insurance but never actually use it. The issues it covers, such as title fraud or filing errors, are relatively rare, leading some to question the cost-effectiveness of the policy.

Do You Need Title Insurance on a New Build?

Yes, getting title insurance on a new build is generally a wise decision. Even though the house itself is brand new, the land on which it is built may have a complex history. 

Title insurance can protect you from issues we’ve discussed, like errors in public records, which can include filing mistakes or clerical issues affecting the land. It can also safeguard against any claims or liens from before the development began. 

Additionally, there might be disputes over property boundaries or easements that were incorrectly reported or not recorded at all. Another significant concern could be ensuring legal access to public roads and utilities, which might have been improperly negotiated or documented. 

Interested in learning more about title insurance? Connect with us! The professionals at Independent Insurance Associates can help you start life in your new house with the peace of mind that you’re taken care of.