Without title insurance, small issues discovered during the title search could prevent the lender from loaning money on a property, therefore preventing you from selling or refinancing. Title insurance protects against claims from defects. Defects are things such as another person claiming an ownership interest, improperly recorded documents, fraud, forgery, liens, encroachments, easements and other items that are specified in the insurance policy. A title policy protects against any financial losses as a result of these issues, whether the error was intentional or accidental. While buyers are not required to purchase title insurance, it is highly recommended. Lenders always require a mortgagee title insurance policy as security for their investment, just as they may require other types of coverage as additional security over their investment in the property too.
Why Title Insurance?
Protect What You Invest In.
A title insurance policy offers the best protection against potential defects that can remain hidden despite the most thorough search of public records in a real estate transaction. The one-time purchase protects the deed to the purchaser for as long as they own the property.
There are two main types of policies:
An Owner's Policy is valid for as long as the property is owned by the purchaser, and up to the purchase price or value on that property. The one time premium paid is optional - either at the time of purchase or at a later date. Nevertheless, an Owner's Title Insurance Policy provides a lifetime of protection to that specific owner against title defects that could otherwise affect that purchaser's claim to the parcel of property.
A Lender's Policy protects the interest of the lender up to the value of the loan issued and is typically always required. A new policy must be issued for every new loan issued on a piece of property. The one time premium is paid at the time of the closing, and concludes once the loan is paid off.
What is covered under a standard policy?
A Standard Policy Guarantees:
You are the owner and have legal right of access to the property.
Prevention of losses due to encumbrances or liens on the property, except for those listed on the policy.
Your title cannot be rejected by a subsequent buyer.