Title insurance provides essential protections to New Jersey homeowners. Forbes explains how title insurance may shield homebuyers from claims affecting the legal ownership of their new home.

While most common types of insurance safeguard against future events, title insurance is a special kind of coverage that protects against losses arising from historical acts or adverse title claims.

What protection does title insurance provide?

A title policy insures buyers that they properly acquired ownership of their new home. It also discloses the existence of any liens or other claims that may encumber the home.

Before a title insurance company issues a policy, an examiner must review the property’s title history. This review looks back at the chain of ownership to ensure that the new owner can rightfully acquire the property from the seller. The examiner also reviews the property’s history for mortgages, liens or other claims. Title insurance protects against mistakes in the public record as well as losses from matters like fraud, liens and omitted heirs.

Who benefits from title insurance?

Title insurance companies issue both owner’s and lender’s policies. An owner’s policy will protect the homeowner against a flawed conveyance or undisclosed matters affecting title. A lender’s policy will insure the lender’s mortgage lien in the property.

How much does title insurance cost?

The home price provides the basis for calculating the cost of title insurance. The cost is a one-time premium paid at closing. The insurer does not collect any ongoing premium.

Title insurance is an important tool that allows buyers to protect their investment in their new home.