Buying a new home is one of life's most gratifying experiences. A title insurance policy will provide both peace of mind and wonderful financial protection. It is important to know why you should have title insurance and what it will actually do for the homeowner.
There are a few things you should know about title insurance. First, there are two types of title insurance, lenders and owners.
If you are involved in the transaction of a residential or commercial property, you will be required to have a lenders title insurance policy. This type of insurance protects your lender against problems with the title to your property. However, lender’s title insurance only protects the lender against problems with the title. In order to protect yourself, you will want to consider purchasing owner’s title insurance.
Owner’s title insurance protects the homeowner if someone decides to sue and say that they have a claim against the home from before the homeowner purchased the property. Often, claims come from a previous owner’s failure to pay proper taxes, or from a contractor who might claim that he or she was not paid for work done on the home before you purchased it.
There are no annual premiums with owner insurance. The premium for title insurance is paid when the policy is issued at closing. The policies insure the property owner for as long as the property is owned, and potentially after the property is sold again. Protection is limited to the face amount of the policy, which is usually the market value of the property when it is purchased. Depending on the type of policy issued, the policy may not cover increases in value.
Owner's title insurance can protect you from the following:
- Documents recorded during the time period between title examination and closing
- Unrecorded documents that may give other individuals or entities an interest in the property
- Encroachments by fences, driveways or other structures
- Forged documents
- Invalid or fraudulent probate of wills and estates
- Improper foreclosure
- Incorrect marital status of owner
- Invalid or contested divorces
- Liens filed by contractors or others who have not been paid for labor, materials or services provided on the property
- Previously undisclosed heirs with claims to the property
- Tax liens
- Transfer of the property by a minor or mental incompetent
- Property line disagreement
- Mistakes in the public records
If you have any questions about title insurance please reach out to one of our attorneys.