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What is title insurance and why do I need it?

For real property purchases in Montana and Washington—as in other states—most lenders will not finance the purchase without title insurance. So, most buyers, whether residential or commercial, have to obtain title insurance as a matter of course. But title insurance directly benefits the purchaser as well.

Title insurance protects both the purchaser and any mortgage holders from financial losses due to certain undisclosed rights or claims to the property. In practice, this means that your title insurance policy should reimburse you if a claimant appears after the purchase and is able to establish a right to the property—for instance, a full or partial right of ownership, a lien on the property, or an easement—that affects the value or marketability of the property. Importantly, even a thorough, pre-purchase title search may fail to reveal claims on real property. A good example is that unknown or undisclosed heirs of a prior owner may assert rights following the settlement of an estate. It is also possible that fraudulent documents, which nonetheless initially appeared legitimate during a title search, were filed on the property in the past. Finally, errors can, and do, occur during title searches simply due to the complexity of real property records. Because real property is such a central asset for both families and business, protecting your investment through title insurance is well worth the cost of the insurance policy.

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