WHY TITLE INSURANCE?
A GUIDE TO UNDERSTANDING THE NEED AND THE VALUE
It is vitally important prospective homebuyers to thoroughly understand the process of purchasing a home and the potential risks associated with the property’s title. Most people don’t realize that the current owners of their prospective home - and their family and heirs — have extremely strong rights associated with the property. In addition, third parties may have liens against the title anything from unpaid child support to outstanding parking tickets! In fact, it takes very little effort to place a lien on a property, but it can take a great deal of time and money to have it removed.
What does title insurance cover? Once the title search has been concluded and curative work to resolve any issues has been completed, title insurance can then be issued. The title insurance policy protects policy owners against covered financial losses associated with claims against the title that were not discovered during the title search process. It also insures against the title being rejected by the subsequent buyer of your property, due to pre-existing title defects and covers losses that may arise after the property is sold if title covenants were included in the sales contract. This includes attorney fees and costs associated with defending the title, and insures that the policy holder is the legal owner and has access to the property. Since the final title insurance policy may have some coverage exceptions (such as conditions, utility and other easements or set-back requirements), policy owners must carefully read the coverage information their specific policy provisions.
Who is covered by title insurance? There are two different kinds of title insurance policies, and each covers a specific type of policy owner:
• Lenders (or Loan) title policies are required by lenders and paid by the borrower(s) at the closing. However, these policies only protect the lending institution in the event a title problem is later uncovered and causes a financial loss. Lender title insurance covers institutions up to the amount of the mortgage loan associated with the property, but makes no provision the borrower’s losses.
• Owners title policies are not required homebuyers, and in many jurisdictions an Owner’s policy is not offered during the mortgage process. As a result, homebuyers are left without title risk coverage and often don’t know they had a choice. Without an Owner’s policy, homebuyers must pay title curative work out-of-pocket and the equity they have in their property can be at risk. However, with an Owner’s title insurance policy in effect, the homeowner’s investment is fully protected since the policy usually covers buyers up to the full price.
Lender’s title policies and Owner’s title policies cover many of the same things. In both cases, the policy holders are protected from title risks such as title search errors, claims by missing heirs or ex-spouses, forged signatures in the chain of title and many other title problems that could go undetected before the close. Attorney fees and settlement costs are also covered up to the policy’s limit.
What does title Insurance cost? Many states set the rates title insurance and major lenders may be able to secure volume-based rates their borrowers. Homebuyers should always feel free to shop policy coverage and rates before making their final choice. Unlike other types of insurances that require ongoing payments, title insurance covers things that happened in the past (prior to the closing) that could affect the status of the property’s title. There is a one time cost title insurance at the time of the closing and the policy is good as long as homebuyers or their heirs own the property.
How Is title Insurance regulated? Each state has a department of insurance that generally regulates all forms of insurance, including title insurance. These governmental bodies are responsible establishing and enforcing regulations insurance sold in their respective states.
A TIME-TESTED PROFESSION Unlike many countries around the world, the United States has a time-tested, extensive system of maintaining public land records that gives property owners an unmatched level of confidence in their ownership status. But the system only works because of the extensive research and corrective actions that are taken to maintain the integrity of property titles. Homebuyers should ask about the title insurance options available to them and feel free to discuss the provisions and exceptions of any title insurance coverage they might be considering. Whatever they ultimately decide about title insurance, it should always be an informed choice.
It is vitally important prospective homebuyers to thoroughly understand the process of purchasing a home and the potential risks associated with the property’s title. Most people don’t realize that the current owners of their prospective home - and their family and heirs — have extremely strong rights associated with the property. In addition, third parties may have liens against the title anything from unpaid child support to outstanding parking tickets! In fact, it takes very little effort to place a lien on a property, but it can take a great deal of time and money to have it removed.
What does title insurance cover? Once the title search has been concluded and curative work to resolve any issues has been completed, title insurance can then be issued. The title insurance policy protects policy owners against covered financial losses associated with claims against the title that were not discovered during the title search process. It also insures against the title being rejected by the subsequent buyer of your property, due to pre-existing title defects and covers losses that may arise after the property is sold if title covenants were included in the sales contract. This includes attorney fees and costs associated with defending the title, and insures that the policy holder is the legal owner and has access to the property. Since the final title insurance policy may have some coverage exceptions (such as conditions, utility and other easements or set-back requirements), policy owners must carefully read the coverage information their specific policy provisions.
Who is covered by title insurance? There are two different kinds of title insurance policies, and each covers a specific type of policy owner:
• Lenders (or Loan) title policies are required by lenders and paid by the borrower(s) at the closing. However, these policies only protect the lending institution in the event a title problem is later uncovered and causes a financial loss. Lender title insurance covers institutions up to the amount of the mortgage loan associated with the property, but makes no provision the borrower’s losses.
• Owners title policies are not required homebuyers, and in many jurisdictions an Owner’s policy is not offered during the mortgage process. As a result, homebuyers are left without title risk coverage and often don’t know they had a choice. Without an Owner’s policy, homebuyers must pay title curative work out-of-pocket and the equity they have in their property can be at risk. However, with an Owner’s title insurance policy in effect, the homeowner’s investment is fully protected since the policy usually covers buyers up to the full price.
Lender’s title policies and Owner’s title policies cover many of the same things. In both cases, the policy holders are protected from title risks such as title search errors, claims by missing heirs or ex-spouses, forged signatures in the chain of title and many other title problems that could go undetected before the close. Attorney fees and settlement costs are also covered up to the policy’s limit.
What does title Insurance cost? Many states set the rates title insurance and major lenders may be able to secure volume-based rates their borrowers. Homebuyers should always feel free to shop policy coverage and rates before making their final choice. Unlike other types of insurances that require ongoing payments, title insurance covers things that happened in the past (prior to the closing) that could affect the status of the property’s title. There is a one time cost title insurance at the time of the closing and the policy is good as long as homebuyers or their heirs own the property.
How Is title Insurance regulated? Each state has a department of insurance that generally regulates all forms of insurance, including title insurance. These governmental bodies are responsible establishing and enforcing regulations insurance sold in their respective states.
A TIME-TESTED PROFESSION Unlike many countries around the world, the United States has a time-tested, extensive system of maintaining public land records that gives property owners an unmatched level of confidence in their ownership status. But the system only works because of the extensive research and corrective actions that are taken to maintain the integrity of property titles. Homebuyers should ask about the title insurance options available to them and feel free to discuss the provisions and exceptions of any title insurance coverage they might be considering. Whatever they ultimately decide about title insurance, it should always be an informed choice.
.JPG)
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