Title Insurance: What and Why?
Title, as in the vested interest to a piece of property, is the evidence that the owner is in lawful possession of that property.
Title insurance protects against claims, such as others’ claims to ownership, improperly recorded documents, fraud, forgery, liens, encroachments, easements and other items that are specified in the policy.
Other insurances, such as medical, auto/home, life, etc., protect against events that may occur in the future and have recurring premiums that are paid annually or monthly. Title Insurance is a one-time investment that is purchased during the process of the real estate closing, and it insures against events that occurred in the past, as they relate to the specific parcel(s) of land, and the current and previous owners.
Title insurance protects real estate owners and lenders against any property loss or damage they might experience because of liens, encumbrances or defects in the title to the property. The buyer, seller and lender all benefit from title insurance policies.
There are 2 types of title policies:
This policy provides coverage for the home owner (buyer/borrower)
Owner’s Policy is generally purchased at closing in a sales transaction and is usually issued in the amount of the sales price. It is valid for as long as the owner(s) or his/her/their heirs are in title for a period of up to ten (10) years after the effective date of the policy. An owner’s policy fully protects the buyer should an issued, covered under the policy, arise with the property’s title, such as, but limited to:
- Liens, unpaid taxes
- Errors or omissions in recording of legal documents
- Errors in the examination of records
- Undisclosed heirs and missing spouses
- Unmarketable titles
This policy provides coverage to the Lender in a purchase or refinance transaction and is usually required when a lender issues and files a mortgage.
The policy coverage amount issued is that of the loan amount and decreases each year until the loan is paid off. The loan policy does not protect the buyer, but ensures the priority of the lender’s interest in the property and protects against:
- Invalid or unenforceable mortgages
- Unmarketable Titles
- Existing Liens
“Ok, but why buy title insurance?”
You may be asking yourself why you would need to purchase title insurance. Title insurance is important, not only to the individual policy holder but for all property owners, as a whole. A healthy title industry begets a healthy real estate industry, and that is good for all consumers. Your home is one of, if not the biggest, investment you will make. We protect that investment. More than half of all restate transactions have an issue in the chain of title. For each transaction, we examine the title of the subject property to find those issues, and assist to remediate them so the transaction can close with clear title, giving our clients the peace of mind that comes with their title insurance policy.