Of the varieties of insurances that exist, one of the least-discussed insurance options is title insurance. But what exactly is title insurance?
Insurance, in general, is the protection against loss, and as a homeowner there are specific insurance policies you might want to consider. These policies consist of hazard insurance, or homeowners’ insurance, life insurance, and title insurance. Title insurance is an insurance policy which protects you from unanticipated third party claims to ownership of your property. Unlike automobile insurance which protects against FUTURE events (the car accident you may get into, title insurance protects against historical matters with respect to your property, for example defects in title that already existed but which were NOT discovered during the escrow period. This distinction highlights the importance of having a diligent professional, an attorney title agent, on your transaction, as a thorough search can make all the difference in your title insurance policy.
While title insurance may be an optional insurance policy for some purchasers, with most real estate experts recommending that you always opt to purchase it, purchasing title insurance for your lender is required. The obligatory lender policy is due to the fact that the lender also has an interest in your property and rights to marketable title.
There is no “one size fits” all title insurance policy. Policies protect against many different types of title defects. An unrecorded easement is an example of a common title defect. This may be an encroachment on your property by a neighboring fence or continuous use of a portion of your land. A more serious title defect would be that the new home owner faces an ownership dispute because country records indicate that the seller who sold the home did not in fact own it, and falsely conveyed title. In this case, the home buyer could face losing the home. However, if you have an owner’s title insurance policy, when a claim against your title is made, your title insurer will research the claim on your behalf, pay for all litigation and attorney’s fees incurred in defending the matter, and if necessary, make you whole for any insured loss. This may include paying your remaining mortgage balance in full.
Title insurance is purchased at the time of closing and is a line-item on your settlement statement. It is a one-time cost and is not paid annually. Policies for a refinance transaction are often significantly less than those for a purchase. Your lender can assign your title insurer, or you may comparison shop on your own. But note, all insurance premiums are highly regulated and there are state mandated rates, therefore the premium rates will not vary. Even more the reason to hire an attorney title agent to work on your next closing. For a quote on closing costs please contact our offices for a free estimate!