Title insurance is one of several insurance policies you are likely to find yourself taking out when you purchase an the USA property, and possibly the most important one. This type of cover is fairly common within US property transactions and provides protection against any issues that may threaten your legal ownership of the home.
There are two types of title insurance policies: owners and lenders insurance. The first kind is applicable to you as the potential buyer of the home.
According to US real estate law, when you purchase a property, technically you aren't buying the actual home itself or the land it's built on. You are in fact buying the title
to the property. The title gives you the right to occupy the home and to use that
space as you see fit. The process is similar in some respects to buying a leasehold property in the UK.
Sometimes the title of the property will contain defects, which could affect your ownership of the property and, if it's to be used as a rental, the right to any income you receive from it.
Another party may have a claim to the property or the land it's built on. For example, a previous owner may have had an undisclosed heir who, by law, has the right to occupy the home. Another scenario is that a previous owner of the home may not have kept up to date with local property taxes' leaving you liable as the current owner.
Prior to the closure of the sale, your insurer will undertake a title search on the property, which means checking with the public records office to unearth any issues relating to the title. If the title of the property is 'clean' they will insure you against any further complications that might ensue.
Buying title insurance is part and parcel of the US homebuying process and we would always advise that you take out a policy and have it in place at the time of
closing, along with any other insurance covers.