Real estate has traditionally been a family's most valuable asset. However, the real estate may be sold to you subject to the rights or claims of the seller, seller's family, heirs, government bodies, contractors, lenders, judgment creditors, the IRS, or other individuals or corporations. You may purchase the real estate without having any knowledge of these rights or claims. In either event, these rights or claims remain attached to the title to the property that you are buying until they are extinguished. Below are some frequently asked questions regarding title insurance. Please also review "21 Reasons for Title Insurance" above for additional information.
What is title insurance?
Title insurance is a unique form of insurance. It provides coverage for future claims or future losses due to title defects which are created by some past event (i.e., event prior to your purchase of the property.)
How does title insurance protect me?
If a claim is made against your insured title, your title insurance company protects you by: (1) Defending your title, in court if necessary, at no cost to you, and (2) Bearing the cost of settling the case, if it proves valid, in order to protect your title and maintain your possession of your property.
Title insurance protects your assets
Title insurance gives you the assurance that possible title issues to the title of the property you purchased will be resolved. Additionally, it is insurance that if any undiscovered claims covered by your policy arises out of the past to threaten your ownership of real estate, it will be disposed of, or you will be reimbursed exactly as your title insurance policy provides.
Owner's Title Insurance and Lender's Title Insurance
There are owner policies and mortgagee, or lender, policies. The owner policy protects the owner of the property, while the mortgagee policy protects the lender who has agreed to provide financing to the owner of the property. Generally, the owner/borrower pays the title insurance premium for the mortgagee policy, as an element of the closing costs typically assumed by the owner. For this reason, owners tend to believe, albeit erroneously, that they have received title insurance coverage when buying a mortgagee title policy for their lender. To the contrary, the owner receives no title insurance protection unless he or she also purchases an owner title policy. In order to encourage the purchase of owner's coverage, many title insurers offer reduced rates when an owner policy and mortgagee policy are purchased simultaneously.
Only one-time premium for Owner's Title Insurance
Unlike other forms of insurance, the original premium is your only cost as long as you or your heirs own the property. There are no annual payments to keep your Owner's Title Insurance Policy in force.