Dream Homes PA Realty Co. Blog


What Exactly Does Title Insurance Cover?

To begin, often, the title insurance that comes included with a mortgage only covers the amount that the mortgage is for. It doesn't cover the buyer's down payment. If a dispute arises, the insurance company doesn't compensate the buyer for his down payment.

Title insurance policies often also don't ensure that the buyer has access to his house to move into. For instance, the seller may fail to reveal that he has leased his property to a tenant for a few years. A lease doesn't actually affect the title. The new buyer does still have title to the property. He will only be able to move in, though, once the lease is done. Title insurance can do nothing about this.

Title insurance also usually doesn't cover circumstances arising out of lawsuits over illegal encroachment. If it turns out after the sale that the seller has built up his property in a way that it encroaches on a neighboring property, litigation arising out of the situation would affect the title. Insurance offers no protection against it.

When it comes to buying a co-op, title insurance is not even possible: a co-op home is a share, rather than an outright title. It's another example where you need more than insurance.