Even the real estate investment opportunities that seem like a sure win come with risks. The idea of an investment deal that can lead to a big payday may cause you to want to move things along quickly, but there’s a crucial step in real estate that you do not want to skip. Before you agree to purchase any property, obtaining title insurance is a must.

What Is Title Insurance?

Title insurance on a piece of property differs from nearly any other type of insurance policy available. Auto, life, homeowners, and disability all protect you against costly situations that may occur in the future. Title insurance, however, guards you against claims that have been made in the past.

There are two types of title insurance: lender and owner. If you’re planning to purchase a property through a mortgage, the lender will require you to obtain lender title insurance. Understand that this type of coverage only protects the lender’s interest in the property. Without owner’s coverage, any money you invest into the property could be lost if a title dispute is discovered.

Title insurance covers the cost and subsequent issues discovered during a thorough title search of the property you wish to purchase. The search makes you aware of any title issues, like liens, with the property. Once you purchase the property and take ownership, the insurance coverage continues to protect you against any litigation involving the property or money owed by previous owners.

How Much Does Title Insurance Cost?

Traditional insurance policies require you to pay monthly premiums, but title insurance requires only one upfront fee. The cost of title insurance will vary depending on your location and the value of the property in question, but, on average, title insurance will cost about $1,000.

Homeowner title insurance policies tend to cost more than lender policies, but in most situations, both coverage options can be obtained for under $2,000. You will pay the title insurance premium at the close of escrow. A new title insurance policy is placed on the property any time the owner refinances an existing mortgage.

While no investor likes to pay more upfront than is necessary to obtain their next project, title insurance is well worth the cost. Knowing that an extensive title search has been completed and the policy continues to cover you from litigation even after you’ve obtained the property is far less expensive than battling for ownership in court.

How Title Insurance Protects You

Title insurance typically covers various types of liens, including judgements, tax liens, mechanic’s liens, and other property defects. Liens are recorded at the county recorder’s office and are discovered in the title search.

No matter your real estate transaction type, title insurance needs to be a part of your checklist. Whether you’re planning a land contract, lease options, “subject to” acquisition, or conventional deal, protecting your investment should be your main priority.

Title insurance offers protection from past events that do not involve you but could affect your ability to own a particular property. Take the time to obtain an insurance policy that will protect your investment future.