What is Title Insurance?
Title Insurance is much different than other lines of insurance such as auto or home. Unlike those lines that protect against future events, title insurance protects against losses arising from unknown or undisclosed defects in the past. It is a means of providing you with a peace of mind when you buy a house or refinance your mortgage. There are two types of policies, an Owner’s Policy and a Loan Policy.
What is an Owner’s Policy?
Owner’s title insurance is usually issued in the amount of the real estate purchase. Only Owner’s title insurance fully protects the buyer should a problem arise with the title that was not uncovered during the title search. Owner’s title insurance also pays for any legal fees involved in defending a claim to your title. It is purchased for a one-time fee at closing and lasts for as long as you or your heirs have an interest in the property.
What is a Loan Policy?
Most lenders require a Loan Policy when they issue you a loan and put a mortgage against the property. The Loan Policy is usually based on the dollar amount of your loan. It protects the lender’s interests in the property should a problem with the title arise. The policy amount decreases each year and eventually disappears as the loan is paid off.
What is a Closing?
In some areas called a “settlement.” The closing is the process of completing a real estate transaction during which deeds, mortgages, and other required documents are signed and/or delivered and where money is disbursed.
What kind of problems can occur with the title to the property?
Some of the more common problems involve making sure a Seller’s mortgage is paid in full so that it no longer has a lien when the Seller sells the property to a buyer. Also, the Seller may have had some judgments filed against the Seller which would be defects on the title and could cause problems for a Buyer if not addressed prior to closing.
I thought Title Insurance was a one-time fee. Why when I refinance, do I have to pay for the cost of a Loan Policy?
When you refinance you are obtaining a new loan and a new mortgage, even if you stay with your original lender. Your lender will usually require a new title search and Loan Policy to protect their investment in the property. You will not need to purchase a new Owner’s Policy; the one you bought at closing is good for as long as you and your heirs have an interest in the property.
Ask if you qualify for a “discount” rate, sometimes called a “reissue” rate. These rates are not available in every state, and you might have to meet some criteria to be eligible, so be sure to ask
When I bought my house and took out a mortgage there was an Owner’s Policy and a Loan Policy issued at the same time. It looks like the Loan Policy was a lower rate. Why is that?
There is what is called a simultaneous issued rate. This rate usually refers to a Loan Policy issued at the same time as an Owner’s Policy when a property is purchased.
I think I have a defect in my title. What should I do?
An owner’s policy of title insurance is intended to provide the homeowner with peace of mind about their legal rights to real property. Promptly notify the title insurance company whose name appears on the Owner’s Title Policy. The title insurance policy includes instructions for contacting the title insurer, usually at the end of the “Conditions and Stipulations” section within the policy.
If you are unable to locate your policy, or are unsure whether you purchased a policy, you should contact the title company, title agent or attorney that handled your purchase and inquire about your coverage.