WHAT IS TITLE INSURANCE?
Title companies have been protecting the American dream of homeownership for more than 125 years. Real estate/property is the nation's largest asset. In fact, the 1990s was one of the best decades in American history for housing. The behind-the-scenes work of title companies ensures the remarkably quick and secure transfer of land, giving lenders and consumers confidence in their investment.
Title insurance is substantially different from other types of insurance coverage, which can often lead to a misunderstanding of the product. Title insurance emphasizes risk prevention rather than risk assumption, so the coverage offers the best possible opportunity to avoid claims and losses in real estate transactions.
During the title search, title companies find and fix problems with the title in 25% of their transactions, usually unbeknownst to the consumer or lender. In addition, title companies pay millions of dollars each year in claims. Title insurance provides significant value to lenders and consumers.
WHY DO I NEED TITLE INSURANCE?
For most Americans, our home is the single largest financial investment we ever make. More importantly, it's where we raise our families, share time with friends and live our lives. And while ownership of our home may seem very straightforward, our rights to enjoy our property aren't always as clear. There are literally dozens of ways in which your title to and your ownership of the property can be jeopardized. The title insurance industry and the policies it provides exist to ensure that title issues don't affect your home ownership rights.
The title insurance policy is what people usually think of when they think of title insurance. For this reason, there are two kinds of title insurance policies: one for owners and one for lenders.
An Owners Policy is assurance that your title company will stand behind you, monetarily and with legal defense, if a title problem arises after you buy your home. Bottom line: your title professional will be there to help pay valid claims and cover the costs of defending an attack on your title.
Receiving an Owners Policy isn't always an automatic part of the closing process. Be sure to request one because without an Owners Policy, you could be liable for costs and legal fees, even if you prevail in a legal action. For a one-time fee at closing, the insurance is usually issued in the amount of the real estate purchase and lasts as long as the owner or their heirs have an interest in the property.
When obtaining a loan, most lenders will require you to purchase a Loan Policy based on the dollar amount of the loan. It protects the lender's interest in the property should a problem arise.
WHAT DOES IT TAKE TO PROCESS THE INSURANCE?
The first step in providing insurance for both the Owners and the Loan Policy involves a search of the public records to determine who owns the property and what liens may exist on the property. These records cover all recorded documents, judgments, liens, taxes, easements and other matters.
The second step involves an extensive review that provides advance warning so that any problems with the title can be resolved prior to closing, whenever possible. A recent survey revealed that corrective actions had to be taken in one of every four real estate transactions. Because of the research and corrective work that title professionals perform, interested parties are typically unaware of the problems resolved without delay in the closing process.
Despite the exhaustive title search, hidden hazards can emerge after closing. Things such as mistakes at the public record, previously undisclosed heirs claiming to own property, or forged deeds could cloud the title. Depending on the insurance product, these issues are covered by the policy.