Title Insurance: What is it?
Under Title insurance, coverage is offered against any kind of loss ascending from issues related with the title of the property in question. It is quite expected, that there have been many more previous owners of the home and land you are about to purchase, and having a weak link in that chain of owners and sellers might translate to a present issue or a future trouble. As for example, in the chain there might be someone who has used a forged signature for title transferring in the past, or there can also be unpaid taxes linked with the property or other liens. The objective of Title insurance is to financially insure the buyer from any expenses and legal fees arising from such issues.
Before the deal is closed, all the available public records are “scrutinized” to identify all the ownership details of the property, and also details about all and any previous businesses related with the piece of property in question. So, at closing, it is generally expected that the land has no such issues or claims, and in case there are, they must be resolved before closing.
However, occasionally, there are issues concerning the title of the property that are not identified or resolved before closing. This kind of flaws might result into making the property less sought-after when the buyer tries to sell it afterwards. Depending on the nature of the issue, it can also demand high expenses for remediating. As for example, the preliminary survey before closing might have failed to reveal that there has been an addition to the property which was built on unauthorized land or without permission, which the new owner needs to remove.
Do I need to buy Title Insurance?
If you are going to need a mortgage for the money you will use to buy the property, the Title Insurance is needed. Every mortgage creditors need to own this kind of coverage for a sum that equals to the loan amount. This insurance continues for the whole period of the loan and ends on complete repaying.
Title Insurance – Who gets the coverage?
Title Insurance can be dispensed to cover a buyer in case of new or resale houses, condominiums or vacational properties. It can also be issued to cover a lender or both the buyer and lender. Risks which are usually covered under the Title Insurance are:
- Indiscretions related to the survey
- Obligatory removal of existing construction
- Claims arising from any kind of deception, counterfeit or compulsion
- Easements that are not registered and issues related to rights- of –way
- Lack or absence of access by vehicles or walkways
- Work orders
- Zoning and non-compliance related issues or lacks and others
For getting a risk covered, the risk must be present on the day of taking the policy. Just like any other types of policies, some risks are not covered under Title Insurance, these are:
- Land claims related to native rights
- Any kind of environmental hazards
So, before you take the policy have an upfront discussion with your lawyer on the risks covered under the insurance and the ones which are not.
When the coverage ends?
When Title Insurance policy is taken in favor of the buyer, the insurance remains effective till the buyer owns the title to that property. There are also some Title Insurances that offers coverage to the person who receives the title for the property after the death of the buyer.
In case the policy is taken in favor of the lender, it offers coverage till the mortgage on the title lasts. The Title Insurance offers coverage if the lender grasps on the security and books definite loss or harm due to a risk covered under the policy. Usually, lenders get this coverage up to the principal sum of the loan.
The Title Insurance premium needs to be paid once, at the time of the purchase of the property. Most of these policies offer coverage to both the buyer and the lender; and others provide the same for some minimum additional charges.
Coverage and the Peace of Mind
With Title Insurance it can be ensured that flaws in the title of a property does not cause delay in the process of ownership transfer. In case any problem related to the title comes up which is covered by the policy, the insurer bear all the legal charges and expenses related to securing the title of the insured party and in case of loss, the insurer pays off.