What You Should Know About Title Insurance
Title Insurance
When purchasing a home or other real estate, you actually don't receive the land itself. What you acquire is title to the property which may be limited by rights and claims asserted by others.
Problems with title can limit your use and enjoyment of real estate as well as bring financial loss. Title trouble can also threaten the security interest your mortgage lender holds in the property.
Protection against hazards of title is available through a unique coverage known as TItle Insurance. Unlike other kinds of insurance that focus on possible future events and charge an annual premium, Title Insurance is purchased for a one-time payment and is a safeguard against loss arising from hazards and defects already existing in the title.
It's Important to Know the Difference
There are two basic kinds of Title Insurance:
Owner's Coverage: Owner's Title Insurance ordinarily is issued in the amount of the real estate purchase and lasts as long as the insured -- or his/her heirs -- have an interest in the property concerned.
Lender's or Mortgage Protection: The amount of Lender's Title Insurance decreases and eventually disappears as the loan is paid off. Most lenders require Mortgage 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.
Risk Elimination Before Insuring
An important part of Title Insurance is its emphasis on risk elimination before insuring. This means the insured has the best possible chance for avoiding title claims and loss.
Title Insurance begins with a search of public land records for matters affecting the title to the real estate concerned. The examination of eveidence from a search is intended to fully report all material objections to the title. Frequently, instruments that don't clearly pass title are found in the chain, or history, of ownership assembled from records in a search. These need to be corrected before a clear title can be conveyed.
Hidden Title Hazards and Surprises
In spite of all the expertise and dedication that goes into a search and examination, hidden hazards can emerge after completion of a real estate purchase, causing an unpleasant and costly surprise. Some examples include the following:
- A forged deed that contains no title to real estate.
- Previously undisclosed heirs with claims against the property.
- Instruments executed under expired or fabricated power of attorney.
- Mistakes in public records.
Title Insurance offers financial protection against these and other hidden hazards through negotiation by the Title Insurer with third parties, payment for defending against an attack on title as insured, and payment of claims.