- Q?How does title insurance work?
When you buy a home, you are given a title to the property, which generally means you receive full legal ownership. Sometimes, there is a hidden mistake in a prior deed, will, mortgage, etc., that may give someone else a valid legal claim against your property!
For new homebuyers, title insurance protects against loss if a covered defect is found in the title to your home. It offers you information on the status of the title to land before you buy or refinance and protects against title claims that may affect the title after you buy. Having title insurance can save you money, time, trouble, even your home!
- Q?How does title insurance differ from other types of insurance?
Title insurance is substantially different from other types of insurance coverage. Title insurance emphasizes risk prevention rather than risk assumption, so the coverage offers the best possible opportunity to avoid claims and losses in real estate transactions.
Because of the important corrective work that title professionals perform, it is rare for lenders or homeowners to suffer a loss under their title insurance policy.
The majority of the title insurance premium goes toward the exhaustive research and due diligence work done by Realty Title upfront, while a small percentage goes toward the payment of claims.
Title insurance is charged only once at closing, where other forms of insurance typically require monthly or quarterly payments.
- Q?What are the different types of Title Insurance?
- The Lender’s Policy
There are two types of title insurance: Lender’s title insurance and Owner’s title insurance. Most lenders require a loan policy when they issue you a loan. The loan policy is usually based on the dollar amount of your loan. It protects their investment (the mortgage) and protects them against loss should a title problem arise. The policy amount decreases each year and eventually decreases as the loan is paid off.
Lender’s title insurance only protects the lender. It does not protect the owner. A lender’s policy protects only the lender’s interest in the property should a problem arise. It does not cover the owner’s equity in the property, and will not pay the homeowner’s legal expenses if there’s a title problem. Only an owner’s title insurance policy will protect the homeowner.
- The Owner’s Policy
Owner’s title insurance is usually issued for the amount of the real estate purchase. You pay a one-time fee at closing and lasts as long as you or your heirs have an interest in the property. This may be even after you have sold the property. Only an owner’s title insurance policy fully protects the homeowner should a title problem arise that was not uncovered during the title search. An owner’s policy can also protect you by paying for any legal fees involved in defending a claim to your title.
What does an owner’s policy provide?
- Protection from financial loss due to claims against the title to your home, up to the face amount of the title policy.
- Payment of legal costs if the title insurer has to defend your title against a covered claim.
- Payment of successful claims against the title to your home covered by the policy, up to the face amount of the policy.
- The Lender’s Policy