Protect your home with title insurance.
Title insurance protects one of the biggest investments you will ever make--real property. Take comfort in knowing that the American Land and Title Association reported that in 2008, title companies only paid only 5 percent of premiums back in claims. This means that title companies provide excellent protection for holders of their policies.
Function
Title insurance protects you or your lender from loss that may result from certain problems related to a property you own. When you pay title insurance, the provider performs an intense background search on your property. Through this process it discovers who truly has ownership of the property or if the property has tax liens. If the title insurance company determines that the title is clean, they issue a policy that will protect you from legal claims.
Types
You purchase an owner’s policy to protect your interest in the property. If a problem arises with the title, the tile insurance company will provide you with legal and monetary resources to defend you against that claim. Your lender may require you to purchase a policy that protects its interest, known as a loan policy. The loan policy, unlike the owner’s policy, decreases with time and disappears when you pay the loan off. The loan policy offers you no protection from loss.
Benefit
The search performed before issuance of title insurance determines the boundaries and will uncover circumstances such as whether the home sits on flood plain or the land was used as a dumping ground for chemical companies. ALTA says that a third of all title searches reveal a problem that title professionals fix before you go to closing. Occasionally, a problem with your property does not appear in pubic records, an owner’s policy will provide necessary money and legal defense to resolve the situation. Title insurance covers incorrect signatures on documents associated with the title. It also covers any instances of forgery or fraud on the title or defective records and protects you from liens or other judgments on the property.
Purchasing
You buy owner’s title insurance for a one-time fee. The coverage, unlike other insurance policies, goes back for an indefinite period of time. The monetary amount of the policy equals the amount of the real estate purchase. It is valid for as long as you or your heirs own the property. Title insurance premiums vary by state, but they are normally 1 percent of the purchase price. To save money on the purchase of title insurance, ask the seller of the property to pay for the policy.
Considerations
If you refinance your property, you need to purchase a new title insurance policy. The provider may offer it at a reduced price. Even if you purchase a new home, you need title insurance; the land itself may have had several owners. During the building process, the builder may have neglected to pay a contractor or supplier. Insurance will protect you if they put a lien on the property.
If any questions arise about your legal right to the property, call your title company. You should do so immediately to prevent a small problem from snowballing into a bigger one.
