what is title insurance?
Owning real estate is a dream for many. Obtaining that dream,
however, takes a great deal of time, money and careful consideration. That’s
why it’s vital to know your property is free of any restrictions that
might hinder or even ruin your investment.
Title insurance assures the buyer that the real estate purchased is wholly
theirs, free of any restrictions such as unpaid debt or unknown owners. It
ensures that, other than the mortgage holder, no one else has any claims or
restrictions against a property.
Title insurance is different from other types in that it protects the insured
from a loss that may occur from matters or faults from the past. It is issued
after a careful examination of the public records. But, sometimes problems
exist that cannot be disclosed in a search. Title insurance protects against
these problems.
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 against any
future faults, but from risks or undiscovered interests. Title insurance costs
a one-time premium for a policy that remains effective until the property is
sold to a new owner - even if that doesn't occur for decades.
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. It also protects the
lender's interest from certain matters which may exist, but may not be known
at the time of the sale.
This policy only protects the lender's interest. It does not protect the purchaser.
The real estate purchaser needs an owner's policy.
What is an owner's policy?
An owner's policy protects the purchaser against a loss that may occur from
a fault in the ownership or interest in the property. This protects the equity
invested in the property.
What does an owner's policy provide?
•
Protection from financial loss due to demands that may be charged against the
title to a home, up to the cost of the title policy.
• Payment of legal costs if the title insurer has to defend the title
against a covered claim.
• Payment of successful claims against the title to the home covered
by the policy, up to the cost of the policy.
Why the seller needs to provide title insurance?
Any purchaser will need evidence that his investment in the property is free
of title defects. The title insurance policy provided to the purchaser is
a guarantee that it is a clear title, unencumbered by any legal attachments
that might limit or jeopardize ownership. It reassures the purchaser that
they are protected from any risks or losses.
Why the buyer needs title insurance?
Without title insurance, a buyer may not be fully protected against errors
in public records, hidden defects not disclosed by the public records, or
mistakes in examination of the title. As a result, the buyer may be held
fully accountable for any prior liens, judgments or claims brought against
the new property. If this should occur, the title policy insures that the
buyer will be defended, at no cost, against all covered claims, up to the
amount of the policy.
How much does title insurance cost?
The Insurance Commission approves and controls the premiums for title insurance
policies. The premiums are paid only once and the cost depends upon the purchase
price of the property and the policy amount must be equal to the purchase
price.
What does title insurance protect from?
•
Undisclosed heirs
•
Forged deeds, mortgages, wills, releases and other documents
•
False impersonation of the true land owner
•
Deeds by minors
•
Documents executed by a revoked or expired Power of Attorney
•
False affidavits of death or heirship
•
Probate matters
•
Fraud
•
Deeds and wills by persons of unsound mind
•
Conveyances by undisclosed divorced spouses
•
Rights of divorced parties
•
Deeds by persons falsely representing their marital status
•
Adverse possession
•
Defective acknowledgements due to improper or expired notarization
•
Forfeitures of real property due to criminal acts
•
Mistakes and omissions resulting in improper abstracting
•
Errors in tax records
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