FREQUENTLY ASKED QUESTIONS
What is Title Insurance?
The primary purpose of title insurance is to eliminate risks and secure your claim to the property and protect you against title “defects” or events that have happened in the past by resolving legal rights to property claimed by someone other than the owner. Hidden defects can surface after you have gone through closing. With title insurance, the title insurer pays the costs if you are forced to defend your ownership in court, and covers any financial loss if the defects can not be resolved.
What is Title?
“Title” refers to the owner’s right to possess and use a particular property.
What is a Title Search?
A title search is a detailed examination of the legal history concerning a property. These records include, deeds, court records, property and name indexes, tax records and many other documents. The purpose of the search is to verify the seller’s right to transfer ownership, and to discover any claims, defects and other rights or encumbrances on the property.
What kind of problems can a title search reveal?
A title search can show a number of title defects and liens, as well as other encumbrances and restrictions, such as: unpaid taxes, unsatisfied mortgages and liens, court judgments, limiting the use of the land.
Are there any problems that a title search cannot reveal?
Yes. There are “hidden” defects which may not surface during the course of a title examination. These defects can arise after you have closed and jeopardize your right to ownership, which is why title insurance is so important.
There are some “hidden hazards” that even the most diligent title search may never reveal.
For instance, the previous owner could have incorrectly stated his or her marital status or not included a spouse on a Deed, resulting in a possible claim by the spouse. Other “hidden hazards” include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names and clerical errors in the records. These defects can arise after you’ve purchased your home and can jeopardize your right to ownership.
How much could I lose if a claim is filed against my property?
That depends on the claim. In an extreme case, you could lose your entire home and the costs relating to your purchase, property - and still be liable to pay off the balance of your mortgage. Most claims aren’t that dramatic, but even the smallest claim can cost you time, money and aggravation, and you may have to pay costs for legal defense.
How does the title insurance protect my investment if a claim should arise?
If a claim is made against your property, the title insurance underwriter will, in accordance with the terms of your policy, assure you of a legal defense - and pay all court costs and related fees. Also, if the claim proves valid, you will be reimbursed for your actual loss up to the face amount of the policy.
The owner of the property has a deed. Isn’t that proof of ownership?
Not necessarily. A deed is just a document by which the right of ownership in land is transferred, whatever that right may be. It’s not proof of ownership, and it doesn’t do away with rights others may have in the property. In addition, a deed won’t show you liens or claims that may be outstanding against the title.
Wouldn’t an abstract show property limitations and restrictions?
Maybe - and maybe not. An abstract is a history of the property title as revealed by the public records. Abstracts may contain errors and do not disclose “hidden hazards” that can threaten your property title if you do not have a title insurance policy.
What about an attorney’s opinion?
An attorney’s opinion is based on a search of the public records. So, once again, even the most exhaustive search of these records may not reveal anything. Unlike a title insurance company, an attorney is not liable if you should suffer loss because of “hidden hazards” in the title. If the opinion is faulty your claim is only against the attorney. With title insurance, and insurance company is obligated to you.
The owner of the property I want to purchase has lived in the home for only six months. He had a title search done six months ago. Why do I need another one?
Because the owner could, in a very short time, do many things to encumber the title. For example, he could grant easements or construct improvements that encroach on adjacent property. It is necessary to conduct an up-to-date title search to uncover any such problems. The previous owner’s title insurance does not afford you any protection.
If the builder of my home already has title insurance on the property, why do I need it again when I purchase the land from him?
A title policy insuring the builder does not protect you. Also, a great many things could have happened to the land since the builder’s policy was issued. Liens, judgments and unpaid taxes for which prior owners or the builder were responsible may be disclosed after you purchase the property - causing you aggravation and costing you money.
Are there different types of title insurance policies?
Yes. Basically there are two different types of policies - a loan policy and an owner’s policy. The loan policy protects the lender’s interest in the property as security for the outstanding balance under the buyer’s investment or equity in the property up to the face amount of the policy. The owner’s policy protects the Purchaser.
How much does title insurance cost?
Probably a lot less than you think. Charges vary in different parts of the country, but generally the cost of the title insurance (including search, examination and related services) amounts to about one percent or less of the cost of the property. And unlike other insurance premiums, which must be paid annually, a title insurance premium is paid one time only, usually at settlement.
How long does my coverage last?
For as long as you or your heirs retain an interest in the property and, in some cases, even beyond.
Where can I get title insurance?
From any licensed title insurance company or its representatives operating in your state. When choosing a title insurer, it is important that you look for a company with expertise and experience, as well as the financial strength to protect you should a claim arise. Your broker or attorney can recommend such a company.