What is Title Insurance Anyway?

By Candice Choi, AP Personal Finance Writer

NEW YORK (AP) — Amid the heap of obligations and expenses that come with buying a house, title insurance can be one of the most bewildering.

The topic can make your eyes glaze over, but anyone buying a home for the first time needs to understand exactly what it is. A home is likely to be the biggest investment you'll ever make, and title insurance plays an important role in safeguarding it.

In this installment of "Your Money," we answer questions about why title insurance exists, what types you'll encounter, and what you can expect to pay for it.

Q: What's the purpose of title insurance?

A: The title to a home can carry any number of ugly surprises. There could be liens against the house for unpaid property, state or federal taxes, or even homeowner association dues. Remodeling work on the home might not have been paid off. Or the ownership of the home — and the right of the seller to put it on the market in the first place — could be disputed.

Whatever the case, once you close on a home, any problems with the title belong to you.

"All liens convey with the property, so you want to make sure you have a clear title," said Mark Savitt, a mortgage broker in Martinsburg, W.Va. and past president of the National Mortgage Brokers Association.

Your attorney or the title insurance company should perform a search on the title, which will likely include going to the county court house to pull property records. However such searches aren't always exhaustive. Title insurance is intended to protect against any liens that might come to light later on.