What Is Title Insurance and Why do I Need It?

Mon, 01 May 2023 18:45:23 GMT

We often get this question and want to educate consumers as much as possible!

Why Title Insurance: Protecting your Home Investment

A home is usually the largest single investment any of us will ever make. When you

purchase a home, you will purchase several types of insurance coverage to protect

your home and personal property. Homeowner’s insurance protects against loss

from fire, theft, or wind damage. Flood insurance protects against rising water, and

a unique coverage known as title insurance protects against hidden title hazards

that may threaten your financial investment in your home.

Protecting Your Largest Single Investment

Title insurance is not as well understood as other types of home insurance, but it is

just as important. You see, when purchasing a home, instead of purchasing the

actual building or land, you are really purchasing the title to the property – the right

to occupy and use the space. That title may be limited by rights and claims asserted

by others, which may limit your use and enjoyment of the property and even bring

financial loss. Title insurance protects against these types of title hazards.

Other types of insurance that protect your home focus on possible future events

and charge an annual premium. On the other hand, title insurance protects against

loss from hazards and defects that already exist in the title and is purchased with a

one-time premium.

Two Kinds of Title Insurance benefit You in Two Ways

There are two basic kinds of title insurance:

 Lender or mortgagee protection

 Owner’s coverage

Most lenders require mortgagee title insurance as security for their investment in

real estate, just as they may call for fire insurance and other types of coverage as

investor protection. When title insurance is provided, lenders are willing to make

mortgage money available in distant locales where they know little about the

market.

Owner’s title insurance lasts as long as you, the policyholder – or your heirs – has an

interest in the insured property. This may even be after you have sold the property.

Depending on local practices and state law where the property is located, you may

pay an additional premium for an owner’s policy or you may pay a simultaneous

issue charge – usually a smaller amount – for the separate lender coverage. You

may even split settlement costs with the seller for the lender or owner’s policy.

What does Your Premium Really Pay For?

An important part of title insurance is its emphasis on risk elimination before

insuring. This gives you, the policyholder, the best possible chance for avoiding title

claims and loss.

Title insuring begins with a search of public land records affecting the real estate

concerned. An examination is conducted by a title agent or attorney on behalf of its

underwriter to determine whether the property is insurable. The examination of

evidence from a search is intended to fully report all “material objections” to the

title. Frequently, documents that don’t clearly transfer title are found in the “title

chain,” or history, that is assembled from the records in a search. Here are some

examples of documents that can present concerns:

 Deeds, wills and trusts that contain improper wording or incorrect names

 Outstanding mortgages and judgments, or a lien against the property

because the seller has not paid his taxes

 Easements that allow construction of a road or utility line

 Pending legal action against the property that could affect a purchaser; or

 Incorrect notary acknowledgements.

Through the search and the examination, title problems are disclosed so they can

be corrected whenever possible. However, even the most careful preventative work

cannot locate all hidden title hazards.

Hidden Title Hazards – Your Last Defense

In spite of all the expertise and dedication that go into a title search and

examination, hidden hazards can emerge after closing, resulting in unpleasant and

costly surprises. Some examples of hazards include:

 A forged signature on the deed, which would mean no transfer of ownership

to you

 An unknown heir of a previous owner who is claiming ownership of the property

 Instruments executed under an expired or a fabricated power of attorney; or

 Mistakes in the public records.

Title insurance offers financial protection against these and other covered title

hazards. The title insurer will pay for defending against an attack on title as insured,

and will either perfect the title or pay valid claims. All for a one-time charge at

closing.

Your home is your most important investment. Before you go to closing, ask about

your title insurance protection, and be sure to protect your home with an owner’s

title insurance policy.

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What Is Title Insurance and Why do I Need It?

We often get this question and want to educate consumers as much as possible!