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Title Insurance . . .What Is It And What Do You Know About It?

Jun 02

filed under: Buying A Home, Real Estate

What do you know about Title Insurance. If you currently own a home in all likelihood you have it, but what do you know about it? If you are a first time home buyer and are in the process of buying a home or have an upcoming closing, unless otherwise negotiated, you will be provided with an “Owner’s Title Insurance Policy” that will be paid for by the seller. Wow something you don’t have to pay for. . . how cool is that. So just what is this insurance policy that you have been given and why is it important that you have it and, even more so, that you understand how it protects one of the largest purchases you will make in your lifetime.

Title Insurance is basically protection against financial loss from defects in title to real property, and from invalid or unenforceable  mortgage liens. You, as a buyer, are not necessarily concerned about mortgage liens, but trust me your Lender is. That is why there are two different Title Policies, one being the Owner’s policy which is what I am addressing in this blog and the other is the Lender’s Policy which I am not going to talk about in this blog with the exception of telling you that the Lender’s Policy is something you will be required to purchase for your lender. . .sorry guys this one is not given to you.

Title Insurance is coverage which protects you, the buyer, against defects in title on the property you own.

To be clear “defects” refers to a recorded document, that should it rear its ugly head, can cause major problems when you are trying to covey a clear title. Of course you would need a “clear title” when and if you ever want to resell your property.

Title Insurance will protect against claims that arise  “after closing” that dispute the title to the property you now own.

In these cases the Title Insurer will pay to defend these types of claims should they arise.

Title Insurance protects you against losses that could emerge during your ownership from title defects.

In other words should the Title Insurer not prevail in defending any of the claims, it will protect you from losses you may incur due to these claims. Your Title Insurer will also cover the costs of defending any claims.

Title Insurance protects you against losses that occur by reason of the “title insurer” having made an error.

When the Title Insurer issues it policies, it has done all of its research using public records and any other means to insure that you have clear title to your property. If the Title Insurer made an error when it issued your policy, your title insurance policy insures you against losses that occur by reason of their error.

Title Insurance provides financial compensation to you, the buyer, if ownership is lost due to an adverse claim.

Now here is what is really IMPORTANT.  If you purchased your property, as an example for $200,000, you would make the assumption that should you lose your property due to an adverse claim that the Title Insurance would cover you for the face value of the policy. DO NOT ASSUME THIS.  The Title Insurer will only pay you the “market value” of  your property up to the amount of the policy that was issued when you purchased your property.  Some Title Insurers will provide additional protection for market value changes. You should consult your Title Insurer as to what they can provide.

Something else that is very IMPORTANT.  When you are going through the closing process your agent will have received what is called a “Preliminary Title Commitment” .

Part of this document called a “Schedule B” will list all the existing items that have been discovered by the Title Insurer about your property that they found in the public records. These items are referred to as “Title Exceptions”. You need to be aware that the real estate agent that is “representing you”  needs to understand how to read and interpret everything that is contained in your Preliminary Title Commitment so that he or she can object to any Title Exceptions that might adversely affect the title to the property you are buying  or affect its’ merchantability.

The last thing you need to know is that unlike other insurance policies that have annual premiums, title insurance  has only a one time premium, so you will not be asked to renew the policy. Its yours as long as you own your property.  Amen to that. .

Title Insurance can get a bit complicated. I have a great resource to answer any questions you may have, my partner/spouse, the lawyer guy. We are both here to help, contact us with any questions you might have or if you need great representation if you are considering buying a home any time in the near future.

Click here to see 70 Ways Title Insurance can protect you against potential defects. Provided by First American Title Co.

 

 

 

 

 

Written by Howard Harris