What is title insurance?
A policy of title insurance is a contract of indemnity between you, the homeowner, and Chicago Title Insurance Company, the insuring company. Title insurance is designed to protect the homeowner against loss or damage arising from title defects, such as unknown liens or encumbrances on the insured title existing at the date of the policy and which are not specific exceptions from its coverage.
In layman’s terms title insurance provides the homeowner and/or lender financial protection for any damages they might incur as a result of some unknown or unforeseen legal problem involving their ownership interest in the land upon which their house or farm sets, including the cost of hiring an attorney to defend such a legal problem.
What does title insurance cover?
At Dickson Title, LLC, we obtain a title search on every transaction and carefully review that information in order to avoid problems after closing. However, many title problems cannot be discovered by an ordinary title search. The following are examples of problems which cannot be discovered by a title search, but are generally covered by a Chicago Title Insurance Company policy:
FRAUD – False claims of ownership, forged deeds, wills, signatures, conveyances, instruments, false representations, false records of all sorts, and illegal acts of trustees, guardians, administrators, and attorneys.
HUMAN ERROR – Errors in copying, indexing, or recording of titles and errors by administrators, executors, trustees, guardians, and attorneys. This may possibly include destruction of records.
IMPROPER DEEDS & WILLS – Deeds by persons of unsound minds or minors; deeds delivered after death or without the grantor’s consent; invalid, suppressed or erroneous wills, missing heirs, and unsettled estates.
LIENS & OTHER RIGHTS – Income and property taxes; homestead rights, community property rights; irregular court proceedings, court opinion reversals, lack of court jurisdiction; defective foreclosures.
What risks are NOT covered?
Title insurance policies generally do not insure against matters that would only be disclosed by actual inspection or survey of the property, such as the number of acres. They also do not insure against certain matters not shown by the public records, such as unrecorded easements, liens or money obligations; unrecorded utility rights of way, public or private roads, community driveways and other types of encumbrances; or against the rights or claims of persons in possession of the property who are not shown by the public records.
What is the difference between a lender’s policy and an owner’s policy?
There are two different kinds of title insurance policies. A lender’s policy, also called a mortgagee’s policy, is issued to the mortgage lender and provides coverage in the amount of the loan. An owner’s policy is issued to the owner of the property and provides coverage in the amount of the purchase price.
Do I need both an Owner’s and Lender’s Policy?
You may receive advice from some advising that as long as the bank requires a Loan Policy there is no need to incur the added expense of an Owner’s Policy. However, a Loan Policy does not provide for reimbursement of the homeowner’s equity in the property. Therefore, if you make a large down payment, or you have paid the principal down on your mortgage over the course of several years before a title issue arises, you could potentially lose your property and forfeit any rights to recoup your investment without the protection of an Owner’s Policy.
Do I need title insurance?
If you are borrowing money to purchase your land, the lender is likely going to require that you purchase a Lender’s Policy. The decision of whether or not to purchase an Owner’s Policy lies with the homeowner or purchaser. Generally, when a Lender’s Policy is issued the purchaser is entitled to a credit which enables the purchaser to obtain an Owner’s Policy for less than $50 dollars. This credit is known as a Simultaneous Issue credit. Given the fact that buying a home is the single biggest purchase in the majority of American’s lives, a one time payment of a nominal premium for permanent protection of that investment is a small price to pay. However, if you still are not sure, contact your attorney or real estate professional for further information.
For more information on Title Insurance download our brochure:
50 Plus Reasons to have Title Insurance