FAQ
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Title Insurance - Introduction The decision to purhase a home (or other real property) is probably the largest and most important financial decision you may ever make. You or your lender will want to make sure that the property is indeed yours and no one will have liens, claims, or encumbrances on your property. Title insurance guarantees that the title to real property is free from all defects in title that may exist in the public records for that property. Possible title defects include:
Before issuing a policy, title companies check for defects in your title by examining public records including deeds, mortgages, wills, divorce decrees, court judgements, tax records, liens, encumbrances, and maps. The title company determines who owns the property, what outstanding debts are against the condition of the title. Title Insurance is a contractual obligation that protects against losses resulting from various types of defects (as set out in the policy) that exist in the title of a specific parcel of real property. This protection is effective as of the issue date of the policy. Title companies issue policies on all types of real property. What Is the Difference Between Title Insurance and Casualty Insurance? Title insurance companies will work in advance of issuing your policy and identify encumbrances on the title, alerting you to possible losses caused by title defects for a one-time fee. The greatest portion of the title insurance premium goes towards risk elimination. A casualty insurer will collect premiums from your policyholders in order to establish reserve funds that will be used to pay for expected losses. Who Does Title Insurance Protect? Title insurance protects you and your lender if someone challenges your property title because of alleged title defects, which were unknown to you at the time you purchased the property and secured title insurance, but come to light at some future date. A title insurance policy contains provisions for the payment of legal fees in defense of a claim against your property that is covered under your title policy. It also contains provisions for payment of losses which result from a covered claim. Coverage can benefit the homeowner or the mortgage company (lender). Who Should Purchase Title Insurance? Both buyers and lenders in a real estate transaction needtitle insurance. Title companies usually issue two types of policies: an owner’s policy that insures the buyer for as long as he or she owns the property, and a lender’s policy that insures the lender’s security interest has priority over the claims that others may have in the property. How Much Insurance Will I Need? The buyer should insure for the full purchase price of the property; the lender needs a policy only for the amount of the loan. Who Pays the Premiums for Title Policies? Local practice determines who pays the premiums, not the law. This could be a negotiation point between the seller and the buyer. Your escrow officer can advise you who normally pays the various premiums in your area. How are Title Premiums Determined and When Is the Premium Paid? Title insurance premiums are based on the amount of coverage provided. The schedule of rates, forms, and any rate modifications are required to be filed with the insurance commissioner. A concise, summarized history of the title to a specific parcel of real property, together with a statement of all liens and encumbrances affecting the property. The abstract of title does not guarantee or assure the validity of the title of the property. It merely discloses those items about the property which are of public record, and thus does not reveal such things as encroachments, forgeries, and the like. |