Title Insurance
Protecting purchasers against loss is accomplished by the issuance of a Title Insurance policy, which states that if the status of the title to a parcel of real property is other than as represented, and if the insured suffers a loss as a result of title defect, the insurer will reimburse the insured for that loss and any related legal expenses, up to the face amount of the policy.
Title Insurance differs significantly from other forms of insurance. While the functions of most other forms of insurance is risk assumption through the pooling of risks for losses arising out of unforeseen future events (such as death or accidents), the primary purpose of Title Insurance is to eliminate risks and prevent losses caused by defects in title arising out of events that have happened in the past. To achieve this goal, title insurers perform an extensive search of the public records to determine whether there are any adverse claims to the subject of real estate. Those claims are either eliminated prior to the issuance of a title policy or their existence is excepted from coverage.
Title Insurance FAQ
What is a Title?
A title is the evidence, of right, that a person has to the ownership and possession of land. It is possible that someone other than the owner has a legal right to the property. If that right can be established, this person can claim the property outright or make demands on the owner as to its use.
Do I need Title Insurance?
Most definitely! Title Insurance is a means of protecting yourself from financial loss in the event that problems develop regarding the rights to ownership of your property. There may be hidden title defects that even the most careful title search will not reveal. In addition to protection from financial loss, Title Insurance pays the cost of defending against any covered claim.
What can make a Title defective?
Any number of problems that remain undisclosed after even the most meticulous search of public records can make a title defective. These hidden “defects” are dangerous indeed because you may not learn of them for many months or years. Yet they could force you to spend substantial sums on a legal defense, and still result in the loss of your property.
But the lender already requires Title Insurance, won't that protect me?
Not necessarily. There are two types of Title Insurance. Your lender likely will require that you purchase a Lender’s Policy. This policy only insures that the financial institution has a valid, enforceable lien on the property. Most lenders require this type of insurance, and typically require the borrower to pay for it.
An Owner’s Policy on the other hand is designed to protect you from title defects that existed prior to the issue date of your policy. Title troubles, such as improper estate proceedings or pending legal action, could put your equity at serious risk. If a valid claim is filed, in addition to financial loss up to the face amount of the policy, your owner's title policy covers the full cost of any legal defense of your title.
How much does Title Insurance cost?
The one-time premium is directly related to the value of your home. Typically, it is less expensive than your annual auto insurance. It is a one-time only expense, paid when you purchase your home. Yet it continues to provide complete coverage for as long as you or your heirs own the property.
When should I look into purchasing Title Insurance?
As soon as you and the seller sign the earnest money contract. With a brief summary of the details, our team of title experts will begin a search of the public records and issue a title commitment. Because there are a number of steps we must take to make certain that we know all we can about the title, it is wise to get the ball rolling as soon as possible.
Can my title company handle the closing?
Yes, in most areas of the country. Signature Title and its agents act as a central clearinghouse for the parties involved – collecting necessary documents, insuring adherence to the lender's title instructions, making arrangements for proper payment and distribution of funds. We are fully prepared to work with you from the beginning of your transaction all the way through to conclusion.
What is GAP coverage?
Signature Title provides gap coverage with both the Mortgagees and Owners' policies. There is a "gap" period between the closing and the date the documents are recorded and until the documents are actually recorded, the property can be left open to claims, fraud and potential loss. Signature Title protects from any uncertainties in the validity of the title during this period.
TRUE OR FALSE?
If no title defects are found in the public records, title insurance is unnecessary.
FALSE. One of the key advantages of title insurance is that it covers title defects not found in public records, as well as errors in those records. Over fifty of these hidden risks have been identified. Forged signatures on deeds, fraud and unsuspected heirs to the real estate are just a few of them. Abstracts, opinions and certificates of title do not offer this protection.
TRUE OR FALSE?
With title insurance, the policyholder is given a free legal defense against all covered claims.
TRUE. It can be very costly for the property owner to battle a claim in the courts. Even if the claim is spurious, the owner might be inclined to pay an out-of-court settlement simply to avoid a bigger expense. Title insurance removes the financial burden of legal action as well as paying for any claim upheld in court.
TRUE OR FALSE?
With title insurance, the policyholder pays regular premiums over the life of the policy.
FALSE. It is hazardous for the buyer to assume that nothing happened which could affect the title, even if the real estate was owned for a relatively short time. The owner may have placed a second mortgage on the property. There may be liens as a result of improvements made, unpaid taxes or judgments. The owner may have gone through bankruptcy or divorce proceedings. These and other events, including surfacing of hidden title defects from the past, require a new search and examination prior to the sale if the buyer is to be properly protected.
