1. WHAT IS TITLE INSURANCE?
Title insurance provides coverage for certain losses due to defects in the title that occurred prior to your ownership. The seller can give you only those rights that have been previously received by him/her with good title. Title insurance protects against such prior fraud or forgery that might go undetected until after closing and possibly jeopardize your ownership and investment.
2. WHAT TO LOOK FOR IN A TITLE COMPANY?
You should insist on a title company with a stable financial history and an established background in your area. Your insurance has no benefit if your title company isn’t around when you need it.
3. WHY DO I NEED TITLE INSURANCE?
When you buy a home, or any property for that matter, you expect to enjoy certain benefits from ownership. For example, you expect to be able to occupy and use the property as you wish, to be free from debts or obligations not created or agreed to by you, and to be able to freely sell or pledge your property as security for a loan. Title insurance is designed to cover these rights you bargain for.
4. WHEN ARE THE PREMIUMS DUE?
There is a one-time premium which is paid at the closing of escrow. It is customary for the seller to pay for the Owner’s Policy. If there is a new loan, the buyer pays for the Lender’s Policy.
5. WHAT DOES IT COST?
The cost varies, depending mainly on the value of your property. The important thing to remember is that you pay only once for an owners policy, then the coverage continues in effect for as long as there is no change in ownership. If you should die, the coverage automatically continues for the benefit of your heirs. Likewise, if a buyer gives you a mortgage to finance a purchase of covered property from you, your coverage continues to protect your security interest in the property.
6. WHAT IF I HAVE A PROBLEM? DO I HAVE TO LOSE MY PROPERTY TO MAKE A CLAIM?
Not at all. At the mere hint of a claim adverse to your title, you should contact your title insurer or the agent who issued your policy. Title insurance includes coverage for legal expenses which may be necessary to investigate, litigate or settle an adverse claim.
7. IF A LENDER GETS TITLE INSURANCE FOR ITS MORTGAGE, WHY DO I NEED A SEPARATE POLICY FOR MYSELF?
The lender’s policy covers only the amount of its loan, which is usually not the full property value. In the event of an adverse claim, the lender would ordinarily not be concerned unless its loan became nonperforming and the claim threatened the lender’s ability to foreclose and recover its principal and interest. And, in the event of a claim, there is no provision for payment of legal expenses for an uninsured party. When a loan policy is being issued, the small additional expense of an owner’s policy is a bargain.
8. CAN YOU BE MORE SPECIFIC ABOUT THE TYPES OF CLAIMS, OR RISKS, COVERED BY TITLE INSURANCE?
There are basically two different levels of coverage: Standard coverage, and Extended coverage.
Standard coverage handles such risks as:
- Forgery and impersonation
- Lack of competency, capacity or legal authority of a party
- Deed not joined in by a necessary party (co-owner, heir, spouse, corporate officer, or business partner)
- Undisclosed (but recorded) prior mortgage or lien
- Undisclosed (but recorded) easement or use restriction
- Erroneous or inadequate legal description
- Lack of a right of access
- Deed not properly recorded
An Extended coverage policy may be requested to protect against such additional defects as:
- Off-record matters, such as claims for adverse possession or perscriptive easement
- Deed to land with buildings encroaching on land of another Incorrect survey
- Silent (off record) liens (such as mechanics’ or estate tax liens)
- Pre-existing violations of subdivision laws or zoning ordinances