What is Title Insurance?
Your real estate purchase may be one of the largest investments that you will ever make. Title insurance makes sure that your investment is protected from claims or restrictions that could result in legal entanglements or even the loss of your property. A title insurance policy guarantees you will never suffer a loss from these claims. Examples of claims may include:
- An old lien from a prior owner of your property that was never properly satisfied
- Taxes, assessments or other municipal charges that went unpaid
- Failure to obtain access to or from your land
- Someone claiming they still have rights to your property
- Forges signatures or other frauds that may have occurred in the chain of title
- Metal incompetence of one of the signing parties
- Undisclosed heirs
- Erroneous descriptions
Before your real estate transaction closes, the title company performs an extensive search of all recorded documents related to the property. Experienced title officers determine their effect on the current status of ownership and a report is issued to your attorney for review. This thorough examination generally allows any pending title problems to be identified and cleared prior to your purchase of the property. In addition to matters shown by public records, other title problems may exist that cannot be disclosed in a search. Title insurance eliminates any risks and losses caused by defects in title from an event that occurred before you owned the property. At closing ownership to the property is transferred from the seller to the purchaser and the title insurance policy begins.
Title insurance is different from other types of insurance in that it protects you, the insured, from a loss that may occur from a matter or defect from the past. Other types of insurance such as auto, life or health cover you against losses that may occur in the future. Title insurance does not protect you against any future defects.
If title insurance companies work to eliminate risks and prevent losses caused by defects in the title before the closing, why do you need title insurance policy?
Because even after most thorough research, cannot absolutely assure that no title defects are present, despite the knowledge and experience of professional title examiners.
What is a Lender’s Policy?
A lender’s policy, also known as a loan policy or a mortgage policy, protects the lender against loss due to unknown title defects. The policy only protects the lender’s interest. It does not protect the buyer. That is why a real estate purchaser needs an owner’s policy.
To whom is the policy issued? Who is paid if there’s a problem?
- A lender policy is usually issued for the amount of the mortgage. It pays the lender if a problem surfaces.
- An owner’s policy covers the property’s full sales price and insures the owner against loss.
What if I have a clam?
At the mere hint of a claim adverse to your title, you should contact your title insurer or the agent who issued your policy in writing within 30 days. Title insurance included coverage for legal expenses, which may be necessary to investigate, litigate or settle an adverse claim.
Am I protected if my home increases in value?
Ask about market value riders for your policy. They increase the coverage amount as the property’s value increases.