A title insurance policy safeguards the insured party from any losses incurred due to discrepancies in the title. For a one time premium paid by the seller at closing (customary), the title policy provides protection as long as the buyer owns the property. The Seller provides the Homeowner’s Title Insurance policy to the Buyer. The Buyer provides a Lender’s Title Insurance Policy to the lender. Unlike other kinds of insurance, title insurance insures against past events affecting the right to real estate property.
Why Is Title Insurance Important?
You need title insurance because any home, no matter how new or apparently secure, is built on land as old as the earth itself. This land had many owners over the years. Claims can be filed against the property and the owner. Title Insurance protects you against these claims and title defects – it makes the home safely yours. This protection is in place as long as you and your heirs remain in ownership.
How Much Does Title Insurance Cost?
Unlike other insurance policies, the Title Insurance premium is a one-time payment. The premium will depend on the coverage selected and/or lender’s request.
Who is Covered?
There are two basic title insurance policies:
- Owner’s policy – Homeowner’s Title Policy, which the Seller typically pays at closing and is usually issued for the amount of the purchase price. It protects the Buyer and it’s heirs as long as they own the property.
- Lender’s Policy – Most Lenders require title insurance as security for their investment in the property. The Buyer typically pays for the Lender’s policy, which is issued for the loan amount.
How Does A Title Company Eliminate Risk?
Title officer conducts an examination of the public records, looking for matters affecting the title to the real property. These records can include items such as deeds, court records, easements, debts, restrictions on the property, etc. An important part of the title insurance process is to eliminate risk prior to issuing a policy. Unfortunately, even the most careful examination cannot disclose ”hidden hazards” to title.
What Are Some Hidden Hazards?
Hidden Hazards can emerge after completion of a real estate purchase creating an unpleasant and sometimes costly surprise. Some examples: forged deeds, undisclosed heirs claiming an interest in the property, mistakes in public records, invalid divorces, etc. While many of these hidden hazards might not be revealed as a result of a routine check, they are covered under the title policy. Many Title companies will defend the insured party and cover the costs of any settlement, including attorney fees.