The single largest investment any person will ever make is usually that of a home or land. When you purchase a piece of property, you will purchase several types of insurance coverage to protect your home and personal property. Flood insurance protects against rising water and floods. Homeowner‘s insurance protects against loss from theft, fire or wind damage. And a title insurance policy protects against hidden title hazards that may threaten your financial investment in your home.
When purchasing a home or land, you are buying a piece of earth that has been owned by others before you. With over hundreds of types of “title defects”, you will want to make sure you have 100% ownership of the property you are buying and that the property is also free and clear from any potential claims that may arise after you purchase the property. This is unlike automobile, health, fire or life insurance which protect you from future events, title insurance will protect you from any events that have occurred in the past.
“How can a title failure occur?”
Ways the Chain of Title can be broken:
1. Documents executed under false, revoked or expired powers of attorney;
2. Deeds by minors;
3. Prescriptive rights in another not appearing of record and not disclosed by survey;
4. Improperly recorded legal documents;
5. Undisclosed heirs;
6. Defective acknowledgements due to improper or expired notarization;
7. Corporate franchise taxes as liens on corporate real estate assets;
8. Gaps in the chain of title;
9. Deeds which appear absolute, but which are held to be equitable mortgages;
10. Forged deeds, mortgages, wills, releases of mortgages and other instruments;
11. False impersonations of the true property owner;
12. Mistakes and omissions resulting in improper abstracting;
13. Inadequate legal descriptions;
13. Errors in tax records;
And there are more…
The policy is used to insure estates or interests held by lenders as a pledge or security for the payment of a debt. (Mortgages, deeds in trust, and loan deeds are the most common types of such securities).
Most lenders insist upon title insurance with every loan because they want nothing to affect their security interest in your property. However, a lender’s title insurance policy does not protect the owner’s interest. In many instances, you must specifically request that owner’s title insurance be issued. If the lender considers title insurance to be vital to protect its interest in your property, shouldn’t you? Be sure to ask the closing officer if an owner’s title insurance policy is going to be issued to you.
A owner‘s policy lasts as long as you or your heirs have an interest in the insured property. This may even be after you have sold the property.
Depending on local practices and state law where the property is located, you may pay an additional premium for an owner‘s policy or you may pay a simultaneous issue charge – usually a smaller amount – for the separate lender coverage. You may even split settlement costs with the seller for the lender or owner‘s policy in certain states.
The title company that handles your closing will issue the title policies. Just like a life insurance policy requirement, in which you are required to take a medical physical, your property will undergo a thorough search of the public records at the county recorder’s office. Any title defects found will be disclosed to you and will require clearing before the closing date. Sometimes these title matters can be cleared easily by the title agent or an attorney may be required for legal process.
Why would I need a Title Policy if my property has gone through a thorough search at the county recorder’s office and all matters, if any, have been cleared?
Quite simply, mistakes are made and things are missed. If a claim does arise, and you have an Owner’s Title Policy, your Title Agent and Underwriter will be ready to defend you in court, if necessary, at no cost to you.
Just as lenders want security with their loan policy, you should want to protect your investment with an owner‘s title policy. For a low, one-time premium you can receive an owner‘s title insurance policy to protect your property against “hidden risks” or undiscovered interests. Be sure to ask your title agent for an owner‘s policy.
Although a title examination is conducted with great expertise and professional dedication, hidden hazards still materialize after closing, causing unforeseen and costly surprises. Examples of such hidden hazards consist of:
1. A deed completed with a forged signature, which would mean no transfer of ownership to you;
2. Unknown heir[s] of a previous owner who is claiming ownership of the property;
3. Instruments executed under an expired or a fabricated power of attorney; or
4. Mistakes in the public records
A Title insurance policy offers financial protection against these and other covered title hazards. The title insurer will pay for defending against an attack on title as insured, and will either perfect the title or pay valid claims.
Your home is your most important investment. Before you go to closing, ask about your title insurance protection, and be sure to protect your home with an owner‘s title insurance policy.