Why You Need Title Insurance
Why You Need Title Insurance | What Title Insurance Covers | Frequently Asked Questions
Title insurance protects an owner’s best interests.
Although a thorough examination of public records is conducted before title insurance is issued, there is always the possibility of an undisclosed title hazard related to past ownership of your property. With an owner’s title insurance policy, you are protected against matters of public record that are not disclosed to you as well as other relevant details that would not be found by an examination of the record, such as a forgery or an unknown heir back in the chain of title.
The loan policy does not protect you.
The loan policy protects the lender against loss due to unknown title defects. This policy only protects the lender’s interest. It does not protect you. That is why you need an owner’s policy that can be issued at the same time as the loan policy for a nominal one-time fee.
What danger of loss can you face?
As an example, let’s say you’ve bought a home for $200,000. You’ve made a $40,000 down payment and your lender holds a $160,000 mortgage lien. Your lender has title insurance coverage protecting the lender’s interest up to $160,000, but your $40,000 is not covered.
What if some matter arises affecting the past ownership of the property?
If you do not have an owner’s title policy, the title insurance company would only defend and protect the interest of the lender. You would have to assume the financial burden of your own legal defense. If your defense is not successful, the result could be a total loss of your property.
The title insurance company pays the lender’s loss and is entitled to take an assignment of your debt. You are out your down payment, other equity in the property that you have accumulated, and your home. You also owe the remaining balance on your note.
How can there be a title defect if the title has been searched and a loan policy issued?
Title insurance is issued after a careful examination of copies of the public records. But even the most thorough search cannot absolutely assure that no title hazards are present, despite the knowledge and experience of professional title examiners. In addition to matters shown by public records, other title problems may exist that cannot be disclosed in a search.
What protection does title insurance provide against defects and hidden risks?
If you have an owner’s title policy, the title insurance company will pay for defending against any valid claim against your title. It will either clear up the title problem or pay your loss. For a one-time premium, an owner’s title insurance policy remains in effect as long as you, or your heirs, retain an interest in the property, or have any obligation under a warranty deed. By combining expertise in risk elimination at the time of issuing a policy, and protection against hidden matters as long as the policy remains in effect, your title insurer protects your investment.
What to look for in a title company.
Size and financial strength are good indications of a dependable title company. But it is also important to consider the following:
- Experience—The ability to use past solutions to solve current problems effectively and creatively.
- SkillThe ability to solve your problems quickly and accurately, using all available and appropriate resources. A title company should offer rapid and accurate answers to title insurance questions, and be able to handle your special needs.
- Commitment to service—A title company should be committed to total customer satisfaction. The people concerned with your transaction should be able to anticipate your problems as well as solve them.