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What is Title Insurance?
A home is usually the largest single investment any of us will ever make. Title insurance provides a unique coverage for real estate owners and lenders against hidden title defects, liens, and encumbrances that may threaten the investment in real estate.
There are two types of title insurance policies:
Most lenders require the buyer to purchase a lender title insurance policy as security for their investment in real estate. The loan policy will make the lender more willing to loan money in locations where they know little about the market. If a hidden defect causes a loss to the lender, they can make a claim on their policy. A homeowner cannot make a claim on the lenders title policy.
If the homeowner chooses to purchase an owner's title insurance policy, they will pay a one-time premium fee to obtain the policy. This policy covers the homeowner as long as the homeowner, or their heirs, have an interest in the property. This policy will protect the homeowner from hidden hazards or title defects that can emerge after closing, preventing unpleasant and costly surprises.
The Past Can Determine Your Future
Generally, a person thinks of insurance in terms of the payment of future loss due to the occurrence of some future event. For instance, a party obtains automobile insurance to pay for future loss occasioned by a future "fender bender" or for the future theft of the car. Title insurance is a unique form of insurance. It provides coverage for future claims or future losses due to title defects which are created by some past event (i.e., event prior to the acquisition of the property.) These risks are far less obvious than those protected against by automobile insurance but can be just as devastating.
Title insurance is not as well understood as other types of home insurance, but it is just as important. 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 land. Most all homes, and the property they occupy have gone through several ownership changes. There may be a weak or broken link at any point in that chain of ownership that could cause significant financial loss to the homeowner. For example, an unknown heir of a previous owner may appear claiming ownership of the property, or there may be unpaid real estate taxes. There could also be easements that allow construction of a road or utility line, or even a forged signature on a deed which would mean no transfer of ownership to the buyer.
Only One Premium
An Owner's Title Policy is purchased with a one-time premium paid at closing. The additional cost above the cost of the lender policy is relatively small. This is especially true compared to the potentially devasting losses that could result from a title defect should you choose not to purchase an Owner's Title Policy. The cost of the policy may even be paid in all or part by the seller to facilitate the closing.
What Does The Owner's Title Policy Premium Pay For?
An important part of title insurance is its emphasis on risk elimination before the property is insured. This gives you, the homeowner, the best possible chance of avoiding title claim and loss.
The process of title insurance starts with an examination of public records. The title examiner will search public records to determine if there are any title defects or if the property is insurable. Each property has a chain of title or history that includes all of the documents that have been filed affecting the property. Here are some examples of the title defects that could cause financial loss to an uninsured party:
How Does a Title Insurance Policy Protect An Insured Owner?
In the event of a covered matter affecting your title, your title insurance policy may protect you in various ways including:
Basic Vs. Enhanced Owners Title Insurance Policies
Ibex Title Corporation offers two types of owner's title insurance policies the Basic Policy and the Enhanced Policy. We pride ourselves on providing complete protection for home buyers. Call or email us today to learn more about the coverages provided on each type of policy and to determine which policy is right for you and your home. We can be reached at (763)390-7282 or orders@IbexTitle.com.
