PrintTitle insurance is a policy of protection against loss that may result in a claim against ownership of property.
Are there different types of title insurance policies?
Yes. There are a number of policies, but the most common are a loan policy and an owner's policy. The loan policy protects the lender's interest in the property as security for the outstanding balance under the buyer's mortgage. The owner's policy safeguards the buyer's investment or equity in the property up to the face value of the policy.
Why do I need title insurance?
You need title insurance to protect the equity you have invested in your property. In an extreme case of claim, you could lose your entire home and property-and still be liable to pay off the balance of your mortgage. Most claims are not that dramatic, but even the smallest claim can cost you time, money, and aggravation, and you may have to pay costs for a legal defense. If a claim is made against your property, title insurance will, in accordance with the terms of your policy, assure you of a legal defense-and pay all court costs and related fees. Also, if the claim proves valid, you will be reimbursed for your actual loss up to the face amount of the policy.
Why do I have to buy a title insurance policy on behalf of my lender?
Anytime a customer gets a real estate loan from a financial institution the customer is required to purchase a Mortgagee's title insurance policy for the benefit of the lender. This insurance is purchased to protect the lender's investment against any clouds on the title.
Does the loan policy protect the borrower?
The loan policy protects the lender against loss due to unknown title defects. It also protects the lender's interest from certain matters which may exist, but may not be known at the time of the sale. But, this policy only protects the lender's interest. It does not protect the borrower. That is why a real estate purchaser needs an owner's policy, which can be issued at the same time as the loan policy, usually for a nominal one-time fee.
Do I need a new Owner's policy when I refinance?
No. A new owner's policy is not required when refinancing. If a new appraisal is performed and the property is worth more than it was when the owner's policy was issued, your current owner's policy can be updated. The new owner's policy can be issued for the current fair market value of the property and you only pay the difference in premium costs for the increase in coverage.
How much does title insurance cost?
Charges vary from state to state. The cost of title insurance, including the search, examination, title commitment, and endorsements, normally amounts to about one percent or less of the cost of the property. And unlike other insurance premiums, which must be paid annually, a title insurance premium is paid one time only, usually at settlement.
What is a title search?
A title search is a detailed examination of the historical records concerning a property. These records include deeds, liens, judgments, court records, property and name indexes, and many other documents. The purpose of the search is to verify a seller's right to transfer ownership, an owner's right to pledge real estate as collateral, to discover any claims, defects, or other rights or burdens on the property.
What kinds of problems can a title search reveal?
A title search can reveal a number of title defects and liens as well as other encumbrances and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgments, declarations, and restrictions limiting the use of the land.
Are there any problems that a title search cannot reveal?
Yes. There are some hidden hazards that even the most diligent title search may not reveal. Some examples are fraud, forgery, defective deeds, mental incompetence, and clerical errors. These defects can arise after you have purchased your home and can jeopardize your right to ownership.
What does title insurance protect against?
Here are just a few of the most common hidden risks that can cause loss of title or create an encumbrance on title:
- False impersonation of the true owner of the property
- Forged deeds, releases or wills
- Undisclosed or missing heirs
- Instruments executed under invalid or expired power of attorney
- Mistakes in recording legal descriptions
- Misinterpretations of wills
- Deeds by persons of unsound mind
- Deeds by minors
- Deeds by persons supposedly single, but in fact married
- Liens for unpaid estate, inheritance, income or gift taxes
- Fraud
This depends on the claim. In an extreme case, you could lose your entire home and property - and still be liable to pay off the balance of your mortgage. Most claims aren't that dramatic, but even the smallest claim can cost you time, money, aggravation, and you may have to pay costs for a legal defense.
How does title insurance protect my investment if a claim should arise?
If a claim is made against your property, title insurance will, in accordance with the terms of your policy, assure you of a legal defense - and pay all court costs and related fees. Also, if the claim proves valid, you will be reimbursed for your actual loss up to the face amount of the policy.
How long does title insurance coverage last?
Under an owner's policy, for a long as you or your heirs retain an interest in the property and, in some cases, even beyond. Under a loan policy, until the loan is paid in full.