Title Insurance, would you leave your largest investment or asset unprotected?
If you are a first-time home buyer, then you might not be familiar with an important insurance policy that you should purchase when you buy a home. Title insurance is different from the other policy coverage's that you might already have in place, like auto, health or life Insurance. These familiar policies are renewable, typically on an annual or bi-annual basis making them a part of your annual expenditures, in contrast, the premiums for Title Insurance are only paid once, usually at the time that you purchase your property, and is considered a part of your closing cost. Upon payment of the premiums at closing, protect your property is in force, yet you will not need to pay any addition money to the insurance company for the policy.
Your home may be the largest investment that you make, so why wouldn’t you choose to protect it with an Owner’s Title Insurance policy? Unfortunately, many home buyers make the mistake of thinking that this coverage is unnecessary. Although they are required to purchase the lender’s Title insurance policy, they opt out of buying the owner’s policy. An opt out leaves them vulnerable to legal expenses, loss of home, loss of equity and more if a defect in the title searches.
FOUR ways that Title Insurance is not like other Insurance coverage:
- Title Insurance is not a renewable policy - yes, that is right, you don't have to pay this policy every year.
- Available in the form of a lender policy and a homeowner policy.
- The homebuyer is usually required to purchase a lender policy on their behalf as a condition of the lending agreement.
- The home buyer can also purchase an owner policy at the same time, which will provide the new homeowner with the protection of financial loss if a problem with the title were to ever surface after the closing and the transfer of title is complete. Therefore, simultaneously purchasing both policies will also reduce the overall cost of the policies.
When buying a home, you have a lot of things on your mind. Chances are, title insurance isn't one of them. However, now that you're aware of the importance of this protection, you might be curious about the process of issuing a title insurance policy to the new home owner.
Title Search complete = Title Agent issues policies
A Title Agent will issue Title insurance policies upon completion of the Title Search. A thorough search of the properties chain of title is the first phase of this process. They begin by searching property records to ensure that the title is free of clerical errors, mistakes in examining records, undisclosed heirs, omissions in deeds, unknown liens or fraud involving the title. It verifies that the seller has legal rights to the property and establishes any debts that are pending against the proper
"One out of every three searches reveals a title or public record defect that's fixed before the transaction closes."
The next step in the process is for the findings of the title search to be examined and verified by the underwriting company that will ultimately issue the Title insurance policies.
This insurance coverage would afford protection in the form of representation if anyone were to challenge your right to the title of your property, after your closing. If that were to happen, the insurance company would defend or compensate the policyholder if any losses incurred due to the defective title.
Liens, encumbrances or defects in the title to the property. Each policy is subject to specific terms, conditions, and exclusion.
If you're still asking, "Why would I need to purchase Title Insurance"?
Well, the simple answer is that when you buy a home or any property for that matter, you expect to enjoy certain benefits from ownership. For example, you expect to be able to occupy and use the property as you wish, to be free from debts or obligations not created or agreed to by you, and to be able to freely sell or pledge your property as security for a loan. Title insurance is designed to cover these rights.