One of the integral parts of buying real estate is dealing with potential problems created by its previous owners. While it may appear that the previous holder of the title made every effort to ensure their obligations were met, things slip through the cracks from time to time. A title insurance policy is one of the common methods for protecting yourself against problems of the previous owner that might come back and bite you. A title commitment is issued by the insurance company, outlining what the insurance covers, as well as any exceptions.

Get started Visit Our Home Ownership Center Answer a few questions. We'll take care of the rest.

How to Obtain the Policy

Before the policy is issued, the insurance company will conduct a title search to find any potential issues that might arise in the future. Through the examination of public records, the company will find and review any documents that might result in problems, such as liens, tax assessments, other tax documents, and special documents, such as divorce or bankruptcy filings. The results of this report are then put together in the title commitment, which represents the extent of the insurance and any exceptions. Also called a title binder, it is a proposal that becomes binding when you pay for the insurance.

Things You Should Keep in Mind

Of course, you should note the type of policy you are paying for. Some lenders will demand a Lender's Policy of Title Insurance before they issue a loan. However, you should note that the title commitment for these policies will only protect the lender and is tied to the mortgage, not the property. Instead, consider an Owner's Policy, which will remain in force as long as you stay in the property and can protect you against title claims unknown at the time of the purchase, such as forged documents or missing heirs who turn up and demand a portion of the property's worth. While costs might seem steep and the relatively low risk of such a situation developing may deter you, consider the potential costs if you happen to be one of the unlucky people who do witness the return of a lost, angry heir.

Have a legal question about your property title? We make it simple to ask a lawyer.

Get started Visit Our Home Ownership Center Answer a few questions. We'll take care of the rest.

Get started Visit Our Home Ownership Center Answer a few questions. We'll take care of the rest.