What is title insurance?
Title insurance is a product that few homebuyers understand, despite the fact that lenders require it to protect their interest in the property, and virtually all homebuyers opt to purchase an owner’s policy to protect themselves as well. In order to understand title insurance, you first must understand the meaning of “title” to a property.
What is a title?
Title to a parcel of real property is the sum of all the facts on which ownership of property is founded or proved. In connection with the purchase of a home, the closing attorney performs an examination of the title in order to detect any problems with the title that are “of record.”
What kind of title defects may not be detectable from a title examination?
Unfortunately, any number of title defects may not be matters of public record, and hence undetectable even in the course of the most meticulous search of such records. You may not learn of these “hidden defects” for many months or years after you close on your home, yet they could force you to spend substantial sums on a legal defense, and still result in the loss of your property. Any of the following matters could provide a basis for a claim after you have purchased the property:
- lost or forged deeds
- transfers by incapable persons
- fraudulent impersonation
- errors or omissions in deeds
- undisclosed heirs or mistaken interpretation of wills and trusts
- federal, state inheritance, and gift tax liens
- errors in tax records
How does title insurance protect me?
Your owner’s title insurance policy can protect you from all of these hidden risks. In addition, your policy covers all legal expenses incurred in investigating, defending, litigating, or settling a claim against your title, even if that claim has no merit. Also, unlike most insurance products you do not have to suffer a loss of your property to make a claim—at the mere hint of a claim against your title, you should contact your title insurer.
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.
If my lender gets title insurance for its mortgage, why do I need a separate policy for myself?
Your lender will require that you purchase a lender’s title insurance policy. This policy only insures that the financial institution has a valid, enforceable lien on the property. It does not protect you. When a lender’s policy is being issued, the small additional expense of an owner’s policy is a bargain.
What should I do now?
Freed Law LLC is an authorized policy-issuing agent for Old Republic National Title Insurance Company. If you are considering, or in the process of, purchasing a home or a piece of property, do not hesitate to reach out to us for more information. For a one-time premium you can affordably protect the single largest investment you may ever make.
