What is Title Insurance?

When you buy a property, you want to be sure the seller has the right to sell it and that when the transaction closes, you actually own it.

A title insurance policy protects property owners and lenders from losses that could result from disputes over ownership of a property's title. This could include fraud, liens against the property, or errors missed during a title search.

Title insurance is important because it protects you from title hazards that could threaten the financial investment you have made in your home or other property. It also protects the lender's investment.

There are two types of title insurance:

An owner's title insurance policy guarantees that the buyer has the right to the property. It usually covers the cost of any legal fees that arise if you have to defend your claim. The cost is based on the price of the property.

Title insurance is issued for a one-time fee usually due when you are closing or settling the real estate transaction. Insurance benefits are paid only to the name that is on the policy. Coverage lasts as long as you hold title to the property.

A lender's title insurance policy protects the bank or other lending institution that issues your mortgage from any losses resulting from disputes over who owns the property.

A policy covers the amount of the loan and the cost is based on the amount of that loan. Most lenders require this coverage, which ends when the mortgage is paid.

Use Closing.com [1] to find a title company near you.

What's covered?

Owner's title insurance protects you from:

• Fraud associated with the title ownership
• Liens existing against the property at the time the policy was issued
• Mistakes in the public record that are not caught before the sale
• Inaccurate or conflicting wills and trusts related to the title
• Missing heirs who suddenly appear and claim to own the property
• Forged or misfiled deeds and other documents
• Errors or flaws in the title that are not discovered during the initial title examination

Lender's title insurance covers the amount of the mortgage loan and protects the lender's interest in the property if any of the above risks occur.

Who pays?

Who pays for the owner's policy depends on the state, and sometimes the county, where the transaction is taking place. For example, in Los Angeles County, the seller usually pays for the policy to ensure that the buyer has legal and proper title to the property. In Marin County, north of San Francisco, the buyer usually pays this expense.

How are title insurance rates determined?

Each state has its own rules for establishing title insurance rates.

How much does it cost?

While some states, such as Texas, Florida and New Mexico, regulate title insurance rates, the cost of title insurance in many states varies enough to make it worthwhile to shop and compare policies and prices. You have the right to choose your title insurance provider.

Ask your title agent about closing package deals. Some title companies offer special rates that may include escrow or settlement services, home warranty coverage with a title policy at a "bundled" rate.

Many title companies offer a short-term rate for property that has been resold within the past five years. If you think you may qualify for special rates, be sure to ask various insurers, as you shop and compare.

Smart Tips

• Always ask about any limits in coverage and review all the services that are included in a policy. The least expensive policy may not cover all your needs.
• Always check the amount on the policy and be sure that coverage begins on the day you close the transaction and take ownership.
• You may be able to save money based on: the type of property you are buying (e.g., single family house, condominium), the age of the property, how recently the policy was issued and whether you have a history with the insurer.
• Be sure the policy describes all the property that is being purchased.
• If you are refinancing, your bank or other financial institution will most likely require you to buy lender's insurance.
• Ask your title company about any special discounts for "reissuing" a lender's policy.
• If you are buying a home that was built recently, be sure that your title policy covers claims made by contractors who may not have been paid for supplies or services.
  
  
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Replies

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Posted on: Thu, 12/24/2009 - 02:19 #1 [3]

Newbuyer [4]

Southbury, CT

This is a great article about title insurance for new home buyers.   We've included it in our "Title Insurance" section at http://www.newbuyer.com [5] and recently posted it on our blog. It has proven to be very helpful to our readers.

Thank you for a great resource.

Elizabeth Dennis

Editor at Newbuyer.com

Reply [6]