Title Search vs. Title Insurance: What’s the Difference and Why You Need Both?

The high financial stakes make real estate transactions complex. As a buyer or seller, you might hear about the need for a title search and title insurance. You might wonder what the difference is and if you need both. This post will explain title search vs. title insurance and why you may need both.

Title Search vs. Title Insurance: What’s the Difference?

What is a Title Search?

A title search aims to uncover issues affecting a real estate title. Along with uncovering issues, a title search also verifies ownership by tracing the chain of title. Any person can perform a title search. However, you typically need to hire a title company or real estate attorney if the search is for official purposes. A title examination can uncover unpaid taxes, liens, ownership disputes, or recording errors. This smart measure reduces the risk of legal complications for the buyer.

What is Title Insurance?

Title insurance is coverage that protects against title defects after the sale. It covers issues you would look for in a title search. This insurance can protect against undiscovered liens, forged documents, unknown heirs, and more. The policy can cover losses if a dispute arises after the purchase. Your insurer may also fund a defense to guard against the financial impact. You also have policies for lenders and owners. The lender’s title insurance protects the mortgage lender’s investment. An owner’s policy is to protect the property owner.

Guarding Against Title Issues

Title searches and title insurance work together to protect against the same issues. A title search is a look into the title’s past to catch issues before the sale. Title insurance provides ongoing protection against these same issues. That’s why you typically need a title search to get title insurance. It reduces risk for the insurer. While a title search minimizes risks upfront, insurance offers long-term peace of mind. If the search missed something, insurance mitigates the impact.

Loan Requirements

Another reason you may need both is that lenders typically require a title search and title insurance. Lenders require them because issuing a mortgage is a significant investment. A title search reduces the risk of issues affecting the investment. The lender’s title insurance ensures financial protection even if the title search missed something. However, it is important to note that the lender’s policy does not cover losses for the property owner.

While typically not required by law, it is still a good idea to do a title search and get title insurance. Even in a cash transaction with no lender requirements, both can provide valuable protection to buyers. The costs are also relatively low when considering the risks they protect against.

Do you need a title search or title insurance? Click here to contact First National Title & Escrow. We offer comprehensive real estate closing services, including title examinations and insurance. Reach out now to learn more about how we can help.

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