The topic of title insurance can be very confusing particularly for first-time home buyers.
Questions like: “Who needs title insurance?” “What type of title insurance should a homeowner purchase?” “Is title insurance a good investment or is it just a waste of money?” are just some of the things people ask when they first hear about title insurance.
To help you make the right decision, let’s find out what owner’s title insurance is and why a homeowner needs it.
What Is Owner’s Title Insurance?
Owner’s title insurance offers protection against potential losses that could arise from undiscovered defects in the title to a piece of property. Therefore, the role of an owner’s title insurance policy is to protect the new owner from the possibility that someone else might contest his or her right to ownership of the property at a future date.
Misconception: There is an unfounded assumption that the lender’s title insurance policy purchased as part of the loan agreement also protects the owner’s interest against future losses resulting from title faults that remained hidden and unsettled for years. In reality, however, this form of insurance only covers claims that impact the lender, up to the amount of the principal on the loan.
Owner’s Title Insurance: Assessing the Benefits
When hiring a title insurance company, the title agents will search public records concerning the piece of property a person is seeking to acquire.
The title search usually involves tracing back the history of all the transfers relating to the property and verifying past deeds, trusts, wills, divorce decrees, tax records, court judgments and bankruptcy filings.
By carefully combing through records, title agents ensure the title is free of clerical errors, omissions in deeds, improperly recorded documents, undisclosed heirs, undiscovered liens, forgery, fraud and any other faults that could jeopardize your legal rights to use and/or sell the property in the future.
The title insurance agents also provide a preliminary title report that will allow you to review all the matters affecting the property. If any title faults have been found, the title company can negotiate with the seller on your behalf and require him or her to fix all the problems before the closing.
Additionally, the title report gives you a legal basis for renegotiating your offer or backing out of buying the home, without having to pay penalties.
In exchange for a nominal one-time fee, the title company can issue a lender’s policy and a buyer’s policy at the same time. Although each owner’s policy is subject to specific conditions and exclusions, the insurer typically covers the legal fees and reimburses the homeowner for losses resulting from title defects covered by the policy.
It’s also worth knowing that owner’s title insurance provides protection for more than just title-related issues. A series of endorsements can be included in the policy to cover things like zoning conflicts, boundary mistakes and environmental issues. The premium charged by the title company varies depending on the endorsements added to each policy.
If you’re looking for your dream home, one of the most important things is to find a team of knowledgeable experts who offer reliable title insurance, escrow and closing services. As a general rule, a reputable and experienced company that’s also licensed and ALTA-certified can make real estate transactions a breeze.
For more information on the right title insurance policy for your property as well as the closing process, please contact us at Guardian Title & Trust, Inc. today to get in touch with our title insurance, escrow and closing professionals.