Title Insurance - A Basic Primer for Consumers

A title insurance policy is just as the name suggests . . . a policy protecting you against loss should the condition of title to land be something other than what you bargained for. Let me explain:

When you buy a home, or any property for that matter, you expect to enjoy certain benefits from ownership. For example, when you purchase a home, you expect to be able to occupy and use the property as you wish, to be free from debts or obligations not created or agreed to by you, and to be able to freely sell or pledge your property as security for a loan. Title insurance is designed to cover these rights you bargain for. Title insurance is particularly important when you are purchasing a foreclosed property, because the risk is increased that there are hidden liens that may exist to haunt you in the future.

The cost of title insurance varies, depending mainly on the value of your property. The important thing to remember is that you only pay once, then the coverage continues in effect for so long as you have an interest in covered property. If you should die, the coverage automatically continues for the benefit of your heirs. If you sell your property, giving warranties of title to your buyer, your coverage continues. Likewise, if a buyer gives you a mortgage to finance a purchase of covered property from you, your coverage continues to protect your security interest in the property. Typically, as a rule of thumb, title insurance runs about $6.00 per each $1,000 in sales price.

Please note: a lender’s title insurance is not the same as an owner’s title policy! The lender’s title policy covers the lender and not you as the homeowner. Also, the lender's policy covers only the amount of its loan, which is usually not the full property value. In the event of an adverse claim, the lender would ordinarily not be concerned unless its loan became non-performing and the claim threatened the lender's ability to foreclose and recover its principal and interest. And, in the event of a claim there is no provision for payment of legal expenses for an uninsured party. When a loan policy is being issued, the small additional expense of an owner's policy is a bargain.

There are different levels of coverage, but in the interest of time and space, I will only review in this blog what types of risks standard coverage typically handles:

- Forgery and impersonation;
- Lack of competency, capacity or legal authority of a party;
- Deeds not joined in by a necessary party (co-owner, spouse, etc.);
- Undisclosed (but recorded) prior mortgage or lien;
- Undisclosed (but recorded) easement or use restriction;
- Erroneous or inadequate legal descriptions;
- Lack of a right of access; and
- Deeds not properly recorded.

Questions? Visit me on the web at http://www.randallwalton.com or send me an e-mail at randallwalton@cinci.rr.com.  Also, don't forget - as the “No Excuses. . . Just Excellence!” Realtor, I am never too busy for your referrals.