TITLE INSURANCE FAQ
What is title insurance?
Title insurance is an insurance policy that protects against future loss should the title condition be any different than when the policy was written.
Why do I need title insurance?
There are two types of title insurance policies: a lender's policy (also called a loan policy) and an owner's policy. The lender's policy provides protection to the lender. An owner's policy protects the landowner and can financially cover the full property value. While a loan policy is often required as part of a real estate transaction, an owner's policy generally is optional if it isn't required in the purchase contract. With an owner's policy, the landowner is protected against any title loss which ensures the value of the property. Because a title policy is considered insurance, if a claim is made against the title, the title insurer must pay any and all costs associated with defense against the challenge and, if unsuccessful in that defense, reimburse the landowner for any reduction in the value of the land.
What is title search?
A title search is a detailed examination of the historical, public records concerning a property. These records include deeds, court records, lien filings and many other public records. The purpose of the search is to verify the seller's right to transfer ownership and to discover any defects with the title.
What kind of problems can a title search reveal?
A title search should show all title defects and encumbrances as well as liens and other restrictions. Among these are unpaid taxes, mortgages, judgements, 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 never reveal. For instance, the previous owner could have incorrectly stated his or her marital status, resulting in a possible claim by a legal spouse. Other hidden hazards include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names and clerical errors in the records. There defects can arise after you have purchased property and can jeopardize the right to ownership.
Can a deed serve as proof of ownership?
No. A deed is just a document used to show transfer of ownership and is evidence only that you have taken over whatever rights the seller had in the property. A deed does not eliminate the rights others may have, and a deed won’t show you liens or claims that may be outstanding against the title.
The property owner already has title insurance. Why do I need another title search?
A title policy insuring your seller does not protect you. Also, many things could have happened to the land since that owner’s policy was issued.
Is title insurance as important as homeowner’s insurance?
Absolutely. Homeowner’s insurance typically provides protection against theft, accidental damage or natural disasters. While these types of loss can certainly be substantial, losses from a defective title could be devastating. If a fire destroys your home, you can rebuild and buy new possessions. If the title to the land fails, you could lose the right to inhabit your home as well as the land it occupies.
How much does title insurance cost?
Charges vary in different sections of the country, because title insurance rates are based on state filings, which means that in our state title insurance costs the same to everyone in the state no matter who is providing it; however, the important thing to remember is that you pay for an owner’s policy of title insurance only once, and there are no monthly premiums.
How long does title insurance coverage last?
The lender’s policy of title insurance lasts until the mortgage is paid in full. An owner’s policy of title insurance lasts for as long as you or your heirs retain an interest in the property.
How does title insurance protect my heirs?
A title insurance policy provides coverage from the time of its effective date back to the origin of the title. After the property has passed to your heirs, if any defect prior to the policy should arise, the title insurance company would defend the title for your heirs just as it would for you if you were alive.
Where can I get title insurance?
You can obtain title insurance from any licensed title insurance company or agency operating in your state. When choosing a title insurer, it is important that you look for a company with expertise and experience, as well as the financial strength to protect you should a claim arise.