Title insurance protects real estate owners and lenders against any property loss or damage they might experience because of liens, encumbrances or defects in the title to the property. Each title insurance policy is subject to specific terms, conditions and exclusions.
Buyers and lenders need title insurance in order to be insured against various possible title defects. The buyer, seller and lender all benefit from issuance of a title insurance policy.
Because title insurance protects both home buyers and lenders, there are two types to suit the end user’s needs:
A lender’s policy is generally required when a lender issues a mortgage loan. The loan policy is usually based on the dollar amount of the loan and it protects the lender’s interests in the property should a problem with the title arise. It does not protect the buyer. The policy amount decreases each year and eventually disappears as the loan is paid off.
An owner’s policy, purchased at closing, provides coverage for the homeowner. It is usually issued in the amount of the real estate purchase and is valid for as long as the owner or his heirs have an interest in the property. Only an owner’s policy fully protects the buyer should a covered title problem arise with the title that was not found during the title search. Possible hidden title problems can include:
Errors or omissions in deeds
Mistakes in examining records
There are two types of owner’s title insurance policies certified by the American Land Title Association® (ALTA®):
The owner’s policy protects you from defects and liens in the history of your title through the date and time your deed is recorded in the public records.
The homeowner’s policy takes your protection to a higher level by providing coverage for many additional risks, including some that might occur after the deed has been recorded. The Homeowner’s policy protects against many common, frustrating problems, and the policy protects your investment for as long as you or your heirs own the property.
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What is Title?
Simply stated, the title to a piece of property is the evidence that the owner is in lawful possession of that property.
How is Title Insurance different from other insurances?
Insurance such as car, life, health, etc., protects against potential future events and is paid for with monthly or annual premiums. A title insurance policy insures against events that occurred in the past of the real estate property and the people who owned it, for a one-time premium paid at the close of the escrow.
What does it cover?
Title insurance protects against claims from defects. Defects are things such as another person claiming an ownership interest, improperly recorded documents, fraud, forgery, liens, encroachments, easements and other items that are specified in the insurance policy.
Who pays for it?
State laws and customs vary on who pays for title insurance, but here’s who generally pays for title insurance:
Home buyers typically cover costs for lender’s title insurance as they are the one who is taking a loan from the mortgage lender.
The person who pays for owner’s insurance can vary. Sometimes, the seller could pay for the title policy as an offering to help with the sale of their property.
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Our team is excited to work with you. If you have any questions at all about title insurance or about closing on a home, please do not hesitate to reach out to our team.