There are two types of title insurance. Lenders' title insurance is required by virtually all lenders to assure them that should a title defect arise, their investment in the subject property is protected. Lenders require the Borrowers to pay for lender coverage as a condition of obtaining a loan.
Owner’s title insurance protects the purchaser from any title claims arising from the previous ownership. The owner is protected from such problems as fraud, forgery and filing errors.
A title search is performed on each transaction. The title records are only as good as the documents recorded. If a previous owner perpetrated a fraud, committed a forgery or the clerk of the land records failed to record or recorded incorrectly, the purchaser is unprotected without owners title insurance. With the coverage, the title insurance company incurs the expense of determining the validity of a claim and defending against the claim. If there is a title defect, the title insurance company pays the claim so that the purchaser retains ownership without loss, or compensates the owner for any and all losses incurred as a result. The cost of the owner's title insurance premium is modest in comparison with the potential loss from a claim. Owner’s title insurance is a one-time premium.
A title company oversees the interests of all parties, consisting of buyers, sellers, lenders, real estate agents and coordinates the transfer of money and property at the time of closing. Prior to settlement the title company will research the ownership history of the property (which is called the title examination) to determine that the title is free of any liens or claims. At the settlement table, the title company collects and distributes funds from the transaction, transfers ownership of the property, and issues title insurance.
The title insurance protects you, the property owner, and the lending institution that holds your mortgage from unforeseen claims that may arise against your property. The policy provides protection from financial loss and payment of legal costs associated with such claims.
No. A title examination is only as good as the land records. Should a filing error happen, if someone perpetrates a fraud, if an estate is mishandled. The title insurance protects you, even though the title examination did not and could not disclose the problem.
Title Insurance rates are set by state insurance commissions and are based on the purchase price of your property (owner's policy) and the loan amount (lender's policy).
Most lenders will require that you purchase a lender's title Insurance policy. This protects their investments in your property. You are not required to purchase an owner's policy; however, your one-time payment will protect your property for as long as you own it.