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.
What is title insurance?
– Title insurance protects real estate owners and lenders against any property loss or damage they might experience because of liens, encumbrances or the defects in the title to the property. Each title insurance policy is subject to specific terms, conditions and exclusions.
How does title insurance differ from other insurance?
– Insurance such as car, life, health, etc., protects against potential future events and is paid for with monthly or annual premiums. A title policy insures against events that occurred in the past regarding the real property and the people who owned it, for a one-time premium paid at the close of the escrow.
What does title insurance cover?
– Title insurance protects against claims from defects. Any number of problems that remain undisclosed after even the most meticulous search of public records can make a title defective. These 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 the loss of your property. 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 actual policy.
Who needs title insurance?
Purchasers and lenders need title insurance in order to be insured against various possible title defects. The buyer, seller and lender all benefit from the issuance of title insurance.
How much does title insurance cost?
– The one-time premium is directly related to the value of your home. Typically, it is less expensive than your annual auto insurance. It is a one-time only expense, paid when you purchase your home. Yet it continues to provide complete coverage for as long as you or your heirs own the property.
How is a title policy created?
– After the escrow officer or lender opens the title order, the title agent or attorney begins a title search. A Preliminary Report is issued to the customer for review and approval. All closing documents are recorded upon escrow’s instruction. When recording has been confirmed, demands are paid, funds are disbursed, and the actual title policy is created.
What is escrow?
– Escrow refers to the process in which the funds of a transaction (such as the sale of a house) are held by a third party, often the title company or an attorney in the case of real estate, pending the fulfillment of the transaction.
But 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 financial institution has a valid, enforceable lien on the property. Most lenders require this type of insurance, and typically require the borrower to pay for it. An Owner’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 owner’s title policy covers the full cost of any legal defense of your title.