OVERVIEW OF TITLE INSURANCE

For most of us, buying a residence is the biggest investment we will ever make. How can you protect that investment? Most people understand the need for homeowners or hazard insurance to protect against fire, theft, etc. However, defects in the title of your home may pose an even greater risk to your investment. You may lose all or part of your investment because of hidden defects in the title to your home.

Title Insurance is your only protection against loss or damage from any claims of ownership against the title of your property. There are basically two types of title insurance policy-the owner’s policy and the lender’s policy. The owner’s policy protects the buyer’s equity in the property up to the purchase price. The lender’s policy protects the lender’s interest in the property as security for the outstanding balance of the buyer’s mortgage.

“Title” is the means by which a person or persons may acquire a right of ownership in real property. The title gives the owner the right to possess, use and enjoy that real property within certain limitations. It also gives the owner the right to sell and/or convey that property.

A title search/examination of the public records may show some of the problems and defects in the title, such as outstanding mortgages, liens, unpaid taxes, judgments against seller/borrower, etc. A search may also show any recorded restrictions and easements limiting the use of the land.

However, there may be problems and defects in the title that may not be revealed in the title examination. Some examples of these hidden defects might be fraud or forgeries on documents such as deeds and wills, missing heirs, defective deeds, clerical errors in records, claims arising because of a married person conveying property without his or her spouse and transfer of a title by a minor.  Moreover, title insurance insures the “gap” period in which the database utilized to examine title is not actualized.  In other words, the database used to examine and research title are at times 2-3 weeks backlogged.  An owner’s title policy will protect and defend your investment if any claims are made against your property, whether the claim is valid or not, at no additional cost to you.

Unlike most other types of insurance, the premium for an owner’s title policy is paid only one time, usually at closing; however, its protection lasts for as long as you or your heirs retain an interest in the property. Don’t take any chances with your biggest single investment. It makes sense to protect your home purchase with title insurance.