Title Insurance – what is title insurance and why is it important?
Title insurance is designed to protect the policy holder’s property from problems arising from the title attached to the property. Title insurance may be obligatory when taking out a mortgage, in order to protect the lenders investment, and is paid for with a one off fee.
So, what is title insurance? Your property or the land on which it is place may have gone through several different owners in the past, and problems can arise if one of them used a forged signature or if for some other reason contracts which transferred the ownership of the property or land weren’t entirely legal, or if real estate taxes or other liens are left unpaid. Title insurance protects the person owned on the insurance policy from any claims or legal fees which might arise from these problems.
Although the title insurance required by mortgage lenders protects their investment up to the amount of the mortgage lent, it does not protect the owner’s equity in that property. This is because it’s a lenders title policy, and protects the lenders interests and possible losses.
In order to protect the equity in your home you will need an owner’s title policy which covers the full value of your property. In some cases, when buying a new home, the seller will pay for an owner’s title policy, in order to prove that they are delivering a good title to the buyer; in some cases, this may be obligatory. If it is not obligatory for the seller to provide title insurance, it may be the borrower’s responsibility to purchase title insurance as an addition to the lenders policy. The title insurance will normally be a very low addition to the cost in the lenders policy.
Unusually, when compared to common policies such as those for life or property insurance, which only protect against events that take place after the policy begins, title insurance protects against events that occurred before the policy began for an unspecified time into the past. Title insurance covers the insurance holder until the property is sold, in which case a new policy will be required. As long as the insurance holder or his or her heirs still have a vested interest in the property, the title insurance policy still holds.
As well as owners and lenders policies, in many states, separate policies for construction loans exist. In order to purchase title insurance for construction loans, you will need a date down endorsement. This recognizes that the insured value of the property has been increased because of the construction funds invested in the property.
Title insurance policies are most common in the USA, and different states will usually have slightly different standard policies. California title insurance policies are usually more extended than those of other states, while Chicago title insurance will defend your title in court at no extra cost.
Title insurances agencies are normally work within one state; for instance, Western Title & Escrow deals with Florida title insurance, while the Texas Land Title Association or TLTA handles Texas title insurance. Another example is that of First American Title Insurance, sometimes known simply as American Title Insurance and formerly known as Stark County abstract company serves Northeast Ohio.
Normally, when choosing insurance, it is important to shop around. However, since title insurance offers very standard cover and consists of a single one off fee rather than a series of payments, then merely choosing a policy which covers all of your needs is enough. You may wish to ask a few companies for a quote, but it isn’t quite as important as with other types of insurance.