What Is Title Insurance?
Title insurance protects purchasers against loss in the event that
the status of the title to a parcel of real estate is other than
as represented. If the insured suffers a loss as a result of a title
defect, the insurer will reimburse the insured for that loss and
any related legal expenses, up to the face amount of the policy.
Title insurance differs significantly from other forms of insurance.
While most forms of insurance protect you from losses that may occur
due to unforeseen future events, title insurance protects you from
losses caused by defects in the title arising out of events that
have happened in the past.. To achieve this goal, title insurers
perform an extensive search of the public records to determine whether
there are any adverse claims to the subject real estate. Those claims
are eliminated prior to the issuance of a title policy or their
existence in excepted from coverage.
There are two main types of title insurance:
1. Homeowner’s Policy: A homeowner’s policy insures
the owner of real estate against loss caused by defects or unmarketability
of the owner’s title. A one-time premium is paid at the time
of policy issuance and coverage lasts for as long as the owner and
the owner’s heirs retain an interest in the property.
2. Lender’s Policy: A lender’s policy insures a beneficiary
under a deed of trust against loss caused by the invalidity or unenforceability
or a lien, or loss of priority of the deed of trust.
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Why Do I Need Title Insurance?
For many Americans, real estate is the most significant investment
they will ever make. Title insurance is a means of protecting yourself
from financial loss in the event that problems develop regarding
the rights to ownership of your property. There may be hidden defects
that even the most careful title search will not reveal. In addition
to protection from financial loss, title insurance pays the cost
of defending against any covered claim.
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18 Reasons For Title Insurance
- A deed or mortgage in the chain of title may be a forgery.
- A deed or mortgage may have been signed by a person under age.
- A deed or mortgage may have been made by an insane person or
one otherwise incompetent.
A deed or mortgage may have been made under a power of attorney
after its termination and would, therefore, be void.
- A deed or mortgage may have been made by a person other than
the owner, but with the same name as the owner.
- The testator of a will might have had a child born after the
execution of the will, a fact that would entitle the child to
claim his or her share of the property.
- A deed or mortgage may have been procured by fraud or duress.
- Title transferred by an heir may be subject to a federal estate
- An heir or other person presumed dead may appear and recover
the property or an interest therein.
- A judgment or levy upon which the title is dependent may be
void or voidable on account of some defect in the proceeding.
- Title insurance covers attorneys’ fees and court costs.
- Title insurance helps speed negotiations when you’re
ready to sell or obtain a loan.
- By insuring title, you can eliminate delays and technicalities
when passing your title on to someone else.
- Title insurance reimburses you for the amount of your covered
- A deed or mortgage may be voidable because it was signed while
the grantor was in bankruptcy.
- Each title insurance policy is paid up, in full, by the first
premium for as long as you or your heirs own the property.
- There may be a defect in the recording of a document upon which
your title is dependent.
- Claims constantly arise due to marital status and validity
of divorces. Only title insurance protects against claims made
by non-existent or divorced “wives” or “husbands.”
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What is a Title?
A title is the evidence, of right, that a person has to the ownership
and possession of land. It is possible that someone other than the
owner has a legal right to the property. If that right can be established,
this person can claim the property outright or make demands on the
owner as to its use.
What can make a Title defective?
Any number of problems that remain undisclosed after even the most
careful search of public records can make a title defective. The
hidden “defects” are dangerous indeed because you may
not learn of them for many months or years. Yet they could force
you to spend substantial sums on a legal defense, and still result
in loss of your property.
If the Lender already requires Title Insurance, won’t
that protect me?
Not necessarily. There are two types of Title Insurance. Your lender
likely will require that you purchase a Lender’s Policy. This
policy only insures that the lender has a valid, enforceable lien
on the property. Most lenders require this type of insurance, and
typically require the borrower to pay for it.
A Homeowner’s Policy, on the other hand, is designed to protect
you from title defects that existed prior to the issue date of your
policy. Title troubles, such as improper estate proceedings or pending
legal action, could put your equity at serious risk. If a valid
claim is filed, in addition to financial loss up to the face amount
of the policy, your homeowner’s title policy covers the full
cost of any legal defense of your title.
How much does Title Insurance cost?
The one-time premium is directly related to the value of your home.
It is paid when you purchase your home and provides complete coverage
for as long as you or your heirs own the property. Click
here for our rates.
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