The ABCs of Title Insurance
1.
What is Title Insurance?
“General” insurance coverage – such as homeowner’s,
auto, and health – provide insurance coverage against loss or damage
by virtue of what may happen in the future. Title insurance, on the other
hand, provides insurance coverage against loss or damage by virtue of
a title problem that exists on or before the date of the policy being
issued that is generally unknown to the issuing agent. Title insurances
services to eliminate certain risks involved with a defective title to
real property and is based on a search of the public records – (The
Koogler Group)
TITLE INSURANCE is an agreement that the insurer will
pay all losses involved in any claim covered by the policy terms.
Title insurance policies provide two types of coverage:
1) If someone contests your insured title in a legal action, the insurer
will defend the title at no expense to you.
2) If there is a defect in your title, which cannot be eliminated, title
insurance protects you from financial loss. That is, you will be reimbursed
up to the amount of the policy - generally, this covers the full amount
of your loss. Examples of title defects, both hidden and obvious, that
could lead to a claim are: lost or forged deeds; a married signer who
represents himself or herself as single; claims of undisclosed heirs;
impersonation of another; clerical errors made at the courthouse when
earlier documents were recorded; incorrect legal descriptions; instruments
signed by minors; instruments signed by mentally incompetent persons;
title taken as a result of an improperly probated will; and confusion
of title resulting from similar names.
Examples of title defects, both hidden and obvious, that could lead to a claim are:
|
2.
When do you purchase title insurance?
Simultaneous with the closing of the real property transfer, you will
purchase an owners title insurance policy, a mortgagee policy (lenders)
or both. The charge for these items will be shown on the settlement statement.
3. Is the Owner’s Title Insurance Policy Necessary?
Yes. Many homebuyers incorrectly believe that the lender’s title
insurance policy, known as a mortgagee policy, protects the homebuyer.
The mortgagee policy protects the lender’s interest only and does
not protect the homeowner’s interest. An owner’s policy is
necessary to protect the homeowner’s interest.
With an owner’s title insurance policy, the homeowner is assured
the insurer will pay all losses involved in any claim covered by the policy
terms and the homeowner is protected in addition to the lender.
4. How are the costs calculated for title insurance
| The cost of title insurance is a modest, one-time fee. There are no annual premiums or renewals. Although you only pay once, the protection continues in effect forever - even after you sell your home. The policy is usually issued in an amount equal to the purchase price of the property in purchase transactions and the amount of the mortgage in refinances. |
Please feel free to utilize American Fidelity Title’s Insurance calculator to determine the cost of the title policy.
