Title insurance is an insurance policy that protects your legal right to own, possess, use, control, and dispose of land.
Transferring a real estate title can be complicated because land is permanent and the usage of land and the rights to its use can change over the years.
A title search is a detailed examination of historical public records concerning a property. These records include deeds, court records, property and name indexes, and many other public documents.
There are two main types of title insurance policies: a lender’s policy and an owner’s policy. A lender’s policy is typically required for a mortgage, it financially covers the amount of the loan and provides protection to the lender. An owner’s policy protects the landowner against a title loss, which ensures the value of the property. With owner’s title insurance, if a claim is made against the title, the underwriter must pay any and all costs associated with defense against the challenge. If unsuccessful in that defense, the underwriter reimburses the landowner for any reduction in the value of the land.
Homeowner’s insurance typically provides protection for the dwelling and its contents. For instance, if a fire destroys your home, you can rebuild and buy new possessions. However, if the title to the land fails, you could lose the right to inhabit your home as well as the land it occupies.
Title insurance charges vary in different parts of the country. However, you pay for an owner’s policy of title insurance only once; there are no monthly premiums.
The lender’s policy of title insurance lasts until the mortgage is paid in full. An owner’s policy of title insurance lasts for as long as you or your heirs retain an interest in the property.
You can obtain title insurance from any licensed title insurance company or their agents. Oh and by the way… we’re one!
A professional will search public records for debts, legal judgments and other homeownership issues to give you peace of mind in your investment.
Some of the items reviewed include:
- prior deeds
- divorce decrees
- court judgments
- delinquent taxes
- child support payments
A title professional will also look for covenants, conditions and restrictions and other types of easements. When an issue is discovered, the title professional will take care of it—typically without you even knowing about it. If the problem is not easily resolved, you will be notified. Title searches reveal problems on more than a third of all residential real estate transactions.
Some title issues are not apparent from a review of the public record. Title insurance provides coverage for undisclosed title defects that might later result in a claim.
Unknown events include:
- documents signed by minors or someone incompetent
- deeds executed under an expired power of attorney
- errors on the public record
This work is necessary to issue the insurance policy and often includes the cost of conducting a title search, examination, correcting errors, issuing the policy, and, frequently, the settlement or closing for consumers.
An owner’s policy protects against these additional items.
An owner’s policy of title insurance provides the homeowner peace of mind about their legal rights to real property.
If you have a question or concern about your rights, promptly notify the title insurance company whose name appears on the title policy. The title policy includes instructions for contacting the title insurer. This information is usually at the end of the “Conditions and Stipulations” section within the policy.
Unable to locate your policy or unsure whether you purchased a policy? Contact the title company, title agent, settlement agent or attorney that handled your purchase and inquire about your coverage.
You can determine if you have title insurance coverage by reviewing the Closing Disclosure provided at the closing of your purchase. For example, charges for an owner’s policy can be found under the “Other Costs” section on page two of the Closing Disclosure.
Contact information for the title insurer may also be found online or with your state department of insurance.
When giving notice of a potential claim to the title insurer, include the property address, a brief statement of the question or matter, copies of any claims documents received, and a copy of your owner’s policy (if available).
Remember, the broad coverage of title insurance includes protection against frivolous claims, or title issues that may not present an immediate problem. It’s best to contact the title insurer promptly, as soon as you have any question or concern about your legal rights with insured land.