What is a Title?
In property law, a title is a bundle of rights in a piece of property in which a party may own either a legal interest or equitable interest. The rights in the bundle may be separated and held by different parties. It may also refer to a formal document, such as a deed, that serves as evidence of ownership.
What is Title Insurance and why do I need it?
Title insurance offers financial protection in the event that problems develop regarding the rights to ownership of your property. There may be hidden title issues or problems that do not come up in an initial title search. These hidden “defects” are worrisome because you may not learn about them for months or even years after you purchase your property. Without title insurance, you could be forced to spend a considerable amount on a property dispute legal defense and still result in the loss of your property. A title insurance policy will pay for defending against an attack on the title and will either perfect the title or pay valid claims.
Title Insurance Owner’s Coverage is a one-time premium that covers you, as the owner, the entire time you or your heirs own your property.
What are some examples of hidden title “defects?”
- A deed executed with a forged signature, which essentially means there was no transfer of ownership to you;
- Unknown heirs of a previous owner who is claiming ownership of the property;
- Mistakes in the public records.
But my lender already requires it. Won’t that protect me?
There are two types of title insurance. Your lender will likely require that you purchase a Lender’s Policy (and typically, you as the borrower are obligated to pay for it). This policy only insures the financial institution has a valid, enforceable lien on the property.
An Owner’s Policy is meant to protect you from title defects that existed prior to the issue date of your policy. If a valid claim is filed against your property, your owner’s policy covers the full cost of any legal defense of your title, in addition to any financial loss up to the face amount of the policy.
How much does Title Insurance cost?
The one-time premium is directly related to the value of your home. Usually, it amounts to less than your annual auto insurance premium. It is paid when you purchase your home and continues to protect you for as long as you or your heirs own the property.