What is title insurance?
Title insurance provides protection from "hidden risk", due to unforeseen claims that may be asserted to your property. The policy provided protection from financial loss and payment of all legal cost to defend title claims.
Why do I need title insurance?
Even though a title search may be extensive and exacting, it is limited to public records, so the possibility of "hidden risk" remains. This is where Homeland's expertise comes in. Records may not reflect claims of missing heirs, false impersonations, forgeries, improperly probated wills or clerical errors in recording legal documents, so without title insurance your investment is at risk. But the risks don't stop there. Confusion due to similar or identical names, deed executed under expired or false powers of attorney, unsatisfied claims not shown on the records and mistaken interpretation of wills and trusts are just a few more of the hidden risks that make the purchase of title insurance and a thorough title search a most prudent one-time investment.What types of policies are available to me as a homeowner?
For the average property owner, there are two different types of title insurance policies that you need to be aware of:
Owner's Title Insurance Policy
Mortgagee's Title Insurance Policy
Since most property owners mortgage or borrow money at the time of purchase or during ownership, the lender can be expected to request protection of its investment against loss. Lenders know that many things can cause loss of title or that expenses are incurred while defending a claim. They insist upon a Mortgagee's Title Insurance Policy to protect their stockholders' and investors' investment in your property.
An Owner's Title Insurance Policy protects your investment (equity) as the buyer or owner of the property. As the owner, you should want to have the same assurance as the lender that the investment you have made cannot be lost because of a problem or defect with the title.
How does title insurance differ from other types of insurance?
Title insurance is different from other types of insurance in that it protects you, the insured, from loss that may occur from matters or defects from the past. Other types of insurance such as auto insurance, life insurance or health insurance, cover you against losses that may occur in the future. Title insurance does not protect against a defect that may originate at a later date.
What are the risks?
There are numerous defects or problems that can arise to cause an attack or loss of the title to your property. Some of these include problems not disclosed by the most careful search of the public records (the title search). Hidden risks can cause a total loss of your investment or heavy legal expenses in the defense of a claim.
Some title problems may show up months or years after the original purchase of the property. The following are examples of some of the matters that can cause loss of title or an expensive lawsuit:
Forged deeds, releases, wills or other legal documents
Failure of spouses to join in conveyances
Undisclosed or missing heirs
Deeds from minors, aliens or persons of unsound mind
Errors in indexing of public records
Liens for unpaid taxes including estate, inheritance, income or gift taxes
Erroneous reports furnished by tax officials
Mistakes in recording legal documents
Deeds from defunct corporations
Unprobated wills
How does title insurance protect against these hidden risks and defects?
Title insurance defends you in a lawsuit attacking your title and either corrects the title problem or pays the insured's losses up to the face amount of the policy. The policy also protects you after you sell the property, for defects occurring prior to your ownership that cause a loss to a purchaser if the title was warranted by you.
The title policy guarantees that at the date the deed was filed for record placing title in the name of the insured, the title was free of defects apart from those "excepted to" in the policy. The policy does not guarantee an actual amount of land. It guarantees that there are no buildings or other improvements belonging to someone else located on the insured land when an acceptable survey is furnished to the title company. An additional premium is paid to amend the standard survey exception.
How do I obtain title insurance?
It's easy! Simply inform the Title Company, attorney or agent handling the closing of your property that you want to purchase an Owner's Title Insurance Policy.
Isn't purchasing both the Owner's and Mortgagee's Policies a double payment or duplicate coverage?
No, it's not a double payment or duplicate coverage. The Mortgagee's Policy protects the lender's interest only so long as the loan is outstanding and only in the amount of the balance of the loan at any given time. The Owner's Policy protects you up to the face amount of the policy during your ownership and after you have sold the property if you have warranted the property to your subsequent buyer.
After arranging a loan, you pay a premium for the purchase of the Mortgagee's Policy based on the amount of the loan. If you desire to purchase an Owner's Policy at the same time, you pay an additional premium only for the difference that covers your equity or investment in the property together with a small "simultaneous issue fee." Because of this, you do not pay twice for the two policies.
If you buy your Owner's Policy separately, you pay the full premium for the policy. Likewise, if you refinance or borrow additional money at a later time, you can expect to pay additional premiums for the new policies, if required.
Questions?
If you have any questions concerning title insurance coverage, please contact HOMELAND TITLE. This is only an introduction to title insurance. The exact terms and conditions of coverage are provided in your policy.