A home is the most important purchase a person can make. So it makes perfect sense that you pay a little extra to protect it from natural disasters and damage. The physical condition of your property is covered, but what about title rights? Let’s take a look at what title insurance is and how it can protect your dreams of ownership.
What is title insurance?
Title insurance is a type of insurance that protects against title damage and loss. These may be liens, tax arrears or property rights. One of the main functions of a title company is to issue these policies and protect the lender or buyer when they make claims.
What does title insurance cover?
Before discussing what title insurance covers, let’s start with the two types of title insurance: the lender’s policy and the owner’s policy. Each policy is issued by the title company to protect the lender and buyer from title risk and is regulated at the state level, which means the price will be the same from title company to title company. other. These policies will cover issues that were not detected during the title search or simply could not have been detected.
The lender’s policy protects the lender against financial loss, while the owner’s policy protects financial loss and property rights.
Owner Title Policy
Typically, a homeowner’s policy is purchased at closing and provides protection for the homebuyer against title defects. The owner’s policy is optional and can be paid for by either the seller or the buyer. Here are some ways a homeowner’s title policy protects homebuyers:
- Ownership claims
- Documents incorrectly registered
- Fraud and counterfeiting
- Unpaid liens
You might be wondering, “Isn’t it the title company’s job to fix these issues before closing?” Yes, but there are many problems that a title search cannot prevent.
For example, let’s say you purchased your property from a husband and wife. Years later, a woman comes forward claiming her signature was forged at closing and she did not consent to the sale of the property. Now she claims a working interest in the property and your ownership rights are in question. In this case, the title company would help cover the costs of settling the claim.
Lender’s title policy
While a homeowner’s policy is optional, the buyer is required to purchase a lender’s title policy. This policy will protect the lender from any financial loss related to title issues. The lender will be protected for the full amount of the loan and, just like with homeowner’s policy, it is regulated at the state level.
NOTE: The lender’s policy only protects the lender. It does not protect the buyer.
How is title insurance different from home insurance?
Home insurance and title insurance are two types of insurance related to your property, but they each serve a distinct purpose.
While home insurance protects your property against natural disasters and general physical damage, title insurance covers damage related to legal property rights. In addition, title insurance is paid as a one-time closing fee. If the seller can provide their owner’s policy on the property, you may qualify for a reduced “reissue” rate, depending on when they purchased the policy.
How much does owner’s title insurance cost?
Title insurance is regulated at the state level and will depend on the sale price of the property. This will be a one-time fee paid at closing and may be paid by either the seller or the buyer. If the seller can supply the policy from its owner, you may be able to get a reissue rate to reduce the price of the policy.
Do I really need title insurance?
As a buyer, you have the ability to opt out of a homeowner’s policy. You must take into account that if issues such as unpaid liens, property claims or encroachment issues arise, you as the owner will be solely responsible for the financial burden.
Title insurance is a one-time purchase that covers you for as long as you own the property. So even if you think these issues are rare, it’s ultimately a small price to pay for comprehensive protection on life’s most important purchase.
Sunnyside Title Insurance Agency is a fully licensed title insurer and settlement agent dedicated to providing professional title and title-related services to attorneys, lenders and real estate professionals. We are a full-service title company committed to excellence in residential and commercial real estate transactions.