We purchase insurance for our health, our home, our cars, our life, and our pets. We do this just in case something may go wrong or we need it. So, wouldn’t it make sense to protect yourself from a financial loss just in case something goes wrong with your title? A quick search on the internet and you will see the horrors that some have gone through because they opted out of title insurance.
We want to answer your most common questions so that you can move into your new home worry-free – thanks to title insurance.
What Does Title Insurance Do?
Unlike most other insurances, title insurance protects you from what happened before you took ownership of the property. It also protects your lender, too.
Imagine closing on your new home, moving in, and a few years down the road you get a notice that someone else is the rightful owner of the property. What do you do? This scenario has happened more than once. Without title insurance, you are left to fight on your own. Situations like this can lead to devastation and great financial loss.
If you have title insurance, your paperwork will instruct you on how to file a claim. Once the insurance company handles it, you will receive a settlement based on the terms of the title insurance you purchased.
What Could Go Wrong with My Title?
Many defects can appear on your title – many that are of public record. Most of these your title curative partner will be able to handle, making sure that the title is free and clear before you purchase the property. Unfortunately, while it isn’t too common, some scenarios happen in which the title had a hidden defect that made it through the change in ownership without being caught. These are the situations title insurance protects against.
A few things that could go wrong are:
- Unprobated wills
- Undisclosed or missing heirs
- Forged deeds, releases, wills, or other legal documents
- Errors in recording legal documents
- Liens for unpaid estate, inheritance, income, or gift taxes
Is Title Insurance Required?
Typically, yes. When you purchase a property using a lender, it is almost always a requirement on the lender’s part that you purchase title insurance. After all, this policy not only protects your interest in the property but that of the lender, too.
For those purchasing a property with cash, title insurance is not a requirement. However, not having it leaves you vulnerable to any of the title defects that could arise. You will have to assess the level of risk you are willing to take.
What is the Title Insurance Process?
To obtain a title insurance policy, the title to the property goes through an extensive search. We’ve put together a brief overview of the steps that are taken.
Records Search & Title Examination
Once the request for title insurance is received, the title agency begins a search through public records for judgments, liens, taxes, patriot searches, and chain of title. Full title abstracts are ordered and a close eye goes through them, reviewing everything.
Title Binder or Commitment
The title agent issues the binder or commitment on the title insurer’s behalf. This document is a written agreement that will insure the property based on the terms spelled out within it. It should also list the insurance amount, who the insured parties are, and any exceptions or requirements that need to be met for the policy to be issued.
Clearing a Clouded Title
If any issues arise during the examination, such as a missing piece in the chain of title or tax liens on the property, it is up to the title agent to reach out to the necessary people to get this cleared. These issues will need to be cleared up before the closing can be set.
Title Insurance Premium Payment at Closing
The title insurance company does require a payment, but it is only a one-time payment. This is required at the time of closing.
Once the closing is complete, the title company will issue the actual title insurance policy.
What Does Title Insurance Cost?
The cost of title insurance will vary based on the state in which the property is being purchased. And, that’s because different states have different requirements and examination processes. Generally, though, title insurance should cost anywhere between $500.00 and $1,500.00. Remember, this amount is due at the time of closing.
American Guardian Title is an Expert in Title Insurance