Title insurance is a type of insurance policy designed to protect both homeowner and lenders from potential financial losses that could arise from covered defects in the title to real estate.

The following is a quick overview of how it benefits both homeowners and lenders alike, and why it’s worth including as part of your transaction.

Benefits to the homeowner

For home buyers, your home is likely to be the largest investment you ever makes, so it’s important to do everything you can to protect that investment.  Title insurance is just one of the many forms of protection available.  While you might never need to make a claim on the policy, it’s important to have it in place in the event you end up being surprised by liens or other claims on the property you didn’t know existed.

Some of the benefits of title insurance for the homeowner include:

• Protection from any costs of defending any matters insured by the policy, including legal expenses, attorney’s fees or otherwise;
• Protection against some types of covered risks that fall under the insurance coverage including defects in the title caused by forgery, fraud, no rights of ingress and egress to/from the land, unpaid mortgages or other liens, unmarketable title, issues with encroachments, easements or rights of way that limit the use of the property, unpaid real estate tax liens or assessments or any other title-related issues that may arise

These protections cover the homeowner for as long as they (or their heirs) own the property, but only for matters occurring prior to the date of the policy.  This offers a significant amount of peace of mind, as the homeowner does not have to worry about being surprised by unpaid liens by previous owners, or other financial losses from covered claims.  In addition, if you decide you’ll sell the property, that insurance policy can also protect you from losses if the sale fails as a result of covered defects in the title.

Benefits to the lender

There are some benefits of title insurance for the lender, as well.  The lender’s title insurance policy protects the lender form financial losses for those types of covered risks as well specifically, against loss resulting from the lender being unable to enforce its mortgage.  Lenders have just as much of an interest in protecting the value of the investment in the property as well, which means they will often insist on title insurance as part of the transaction.

For more information about the benefits of title insurance to the homeowner and the lender and the steps you need to take when adding title insurance policies to your transaction, contact an experienced real estate lawyer in the U.S. Virgin Islands.

Nash Davis is Chair of the Real Estate & Financial Services Practice Group at BoltNagi PC, a full service business law firm on St. Thomas, U.S. Virgin Islands.