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Why Title Insurance |
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Protecting your Home Investment
A home is usually the largest single investment any of
us will ever make. When you purchase a home, you will
purchase several types of insurance coverage to protect
your home and personal property. Homeowner's insurance
protects against loss from fire, theft, or wind damage.
Flood insurance protects against rising water. And a unique
coverage known as title insurance protects against hidden
title hazards that may threaten your financial investment
in your home. |
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Protecting Your Largest Single
Investment
Title insurance is not as well understood as
other types of home insurance, but it is just as important.
You see, when purchasing a home, instead of purchasing
the actual building or land, you are really purchasing
the title to the property - the right to occupy and use
the space. That title may be limited by rights and claims
asserted by others, which may limit your use and enjoyment
of the property and even bring financial loss. Title insurance
protects against these types of title hazards. Other
types of insurance that protect your home focus on possible
future events and charge an annual premium. On the other
hand, title insurance protects against loss from hazards
and defects that already exist in the title and is purchased
with a one-time premium. |
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Two Kinds of Title Insurance
benefit You in Two Ways
There are two basic kinds of title insurance: |
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- Lender or mortgagee protection,
- Owner's coverage.
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| Most lenders require mortgagee title
insurance as security for their investment in real estate,
just as they may call for fire insurance and other types
of coverage as investor protection. When title insurance
is provided, lenders are willing to make mortgage money
available in distant locales where they know little about
the market. Owner's title insurance lasts as long as
you, the policyholder - or your heirs - has an interest
in the insured property. This may even be after you
have sold the property.
Depending on local practices and state law where the
property is located, you may pay an additional premium
for an owner's policy or you may pay a simultaneous
issue charge - usually a smaller amount - for the separate
lender coverage. You may even split settlement costs
with the seller for the lender or owner's policy. |
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What does Your Premium Really
Pay For?
An important part of title insurance is its emphasis on
risk elimination before insuring. This gives you, as the
policyholder, the best possible chance for avoiding title
claim and loss. Title insuring begins with a search
of public land records affecting the real estate concerned.
An examination is conducted by the title agent or attorney
on behalf of its underwriter to determine whether the
property is insurable. The examination of evidence from
a search is intended to fully report all "material
objections" to the title. Frequently, documents
that don't clearly transfer title are found in the "chain,"
or history that is assembled from the records in a search.
Here are some examples of documents that can present
concerns: |
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- Deeds, wills and trusts that contain improper wording
or incorrect names;
- Outstanding mortgages and judgments, or a lien against
the property because the seller has not paid his taxes;
- Easements that allow construction of a road or utility
line;
- Pending legal action against the property that could
affect a purchaser; or
- Incorrect notary acknowledgements.
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| Through the search and the examination,
title problems are disclosed so they can be corrected
whenever possible. However, even the most careful preventative
work cannot locate all hidden title hazards. |
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Hidden Title Hazards - Your
Last Defense
In spite of all the expertise and dedication that go into
a title search and examination, hidden hazards can emerge
after closing, resulting in unpleasant and costly surprises.
Some examples of hazards include: |
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Deeds, wills and trusts that contain
improper wording or incorrect names;
- A forged signature on the deed, which would mean
no transfer of ownership to you;
- An unknown heir of a previous owner who is claiming
ownership of the property;
- Instruments executed under an expired or a fabricated
power of attorney; or
- Mistakes in the public records.
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| Title insurance offers financial protection
against these and other covered title hazards. The title
insurer will pay for defending against an attack on title
as insured, and will either perfect the title or pay valid
claims. All for a one-time charge at closing.
Your home is your most important investment. Before
you go to closing, ask about your title insurance protection,
and be sure to protect your home with an owner's title
insurance policy.
Information provided compliments of Stewart
Title. |
