What is Title Insurance and why do I need it?
It’s protection against loss if a covered defect is found in your title.
When you buy a home you are given a title to the property which generally means you receive full legal ownership. But … sometimes there’s a hidden mistake in a prior deed, will, mortgage, etc. that may give someone else a valid legal claim against your property! Title Insurance is important because it provides a “safety fence” around your property. Having Title Insurance can save you money, time, trouble – even your home!
Who is covered by Title Insurance?
The Lender – When you buy property and take out a loan to pay for it, you are commonly required to buy Title Insurance. This covers the outstanding balance on your loan for the Lender, but does not protect you.
The Buyer – When acquiring property, it’s a good idea to get your own Title Insurance Policy. It will give you peace of mind and maximum protection in case there’s a claim against your home. There are typically 4 hidden risks:
- ERRORS – Incorrect information on deed, mortgage, public records, etc. such as wrong names.
- LIENS – Claims against the property or the seller that become the new owner’s responsibility after the sale. Examples are unpaid mortgages, taxes, sewer and water assessments, bills owed to workers or other creditors etc.
- CLAIMS TO OWNERSHIP – For instance, a claim to “martial interest” by the spouse of of a former owner or by a child of a former owner who was not mentioned in his or her parent’s wills.
- INVALID DEEDS – For example, transfer by a previous owner who was not mentally competent. A forged or fraudulent deed in the chain of title.
MANY of these problems may not be discovered in a routine title search. No matter how careful or efficient, human beings can make mistakes which could ultimately result in financial loss if not insured against. Items such as missed judgments, tax liens or a prior mortgage may be missed or omitted from a title search or commitment. Undisclosed interests may surface at a later date.
Title insurance is a one-time premium based on the sale price of the property or on you loan amount. For a Buyer, it insures the title to the property for as long as they or their heirs own the property. For a Lender, the policy insures the lender until the loan is paid in full. If an Owner’s Policy and Lender’s Policy is purchased simultaneously, there is a substantial discount.