Some common examples of problems covered by an Owner’s Title Insurance Policy include: Title insurance.
Improper execution of documents
Mistakes in recording or indexing of legal documents
Undisclosed or missing heirs (including divorces of previous owners of the home)
Unpaid taxes and assessments
Unpaid judgments and liens
Mental incompetence of grantors on the deed
Impersonation of the true owners of the land by fraudulent persons
Refusal of potential purchaser to accept title based upon condition of title
What can make the Title to my home defective?
When you purchase your home, you take “title” to your property. 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 a potential lawsuit, significant financial loss, or even the loss of your property.
Won’t the Lender’s Title Insurance Policy protect me?
No, there are two types of Title Insurance; the lender’s policy, and the owner’s policy. Your lender very likely will require that you purchase a Lender’s Title Insurance Policy on their behalf. This policy only insures that the lender 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 Title Insurance 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 Insurance Policy covers the full cost of any legal defense of your title.
The one-time premium is directly related to the value of your home. Typically, it is less expensive than your annual auto insurance. Often, it’s roughly one-half to one percent of the final sales price. Here’s the great part; it is a relatively low, one-time only expense, paid when you purchase your home. Yet this title policy continues to provide complete coverage for as long as you or your heirs own the property.
Title insurance protects real estate owners and lenders against any property loss or damage they might experience because of liens, encumbrances or defects in the title to the property. Each title insurance policy is subject to specific terms, conditions and exclusions.
How does title insurance differ from other insurance?
Insurance such as car, life, health, etc., protects against potential future events and is paid for with monthly or annual premiums. A title insurance policy insures against events that occurred in the past of the real estate property and the people who owned it, for a one-time premium paid at the close of the escrow.
Title insurance protects against claims from defects. Defects are things such as another person claiming an ownership interest, improperly recorded documents, fraud, forgery, liens, encroachments, easements and other items that are specified in the actual policy.
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Purchasers and lenders need title insurance in order to be insured against various possible title defects. The buyer, seller and lender all benefit from issuance of title insurance.