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Title Insurance

Title Insurance:

What is a title?

 

The title to a piece of property is the evidence that the owner is in lawful possession of that property.

 

What is title insurance?

Title insurance protects real estate owners and lenders against any property loss or damage they might experience because of liens, encumbrances or defects in the title to the property. Each title insurance policy is subject to specific terms, conditions and exclusions. A title insurance policy insures against events that occurred in the past of the real estate property and the people who owned it, for a one-time premium paid at closing.

 

How is a title insurance policy created?

After the escrow officer or lender opens the title order, the title agent begins a title search. A Preliminary Report is issued to the customer for review and approval. All closing documents are recorded per escrow’s instruction. When recording has been confirmed, demands are paid, funds are disbursed, and the actual title insurance policy is created.

 

What are the title insurance policy types?

 

  • The Owner’s Policy insures the new owner/home buyer, and a lender’s policy insures the priority of the lender’s security interest.

 

 

The Two Title Insurance Policies

As a buyer of real estate property, you'll want to protect your investment — and the ownership rights that come with it. That's why it's wise to purchase an owner's policy of title insurance in conjunction with the loan policy your mortgage lender will require you to purchase. The loan policy insures the lender against covered title defects up to the amount of the insurance, while an owner's policy protects your interest in the property

 

Lender's Policy

If you have a home mortgage, chances are your lender will require you to purchase a title insurance policy. This lender's policy (often called a loan policy) is required by most lending institutions as a way to insure their security interest in the property. This policy protects the bank or other lending institution for as long as they maintain an interest in the property (typically until your mortgage is paid off).

 

Owner's Policy

However, as a buyer, you also want to protect your investment -- and the ownership rights that come with it. This is why it's wise to purchase an owner's policy of title insurance, which will protect your rights as the homeowner for as long as you or your heirs have an interest in the property.

Both title insurance policies not only pay valid claims and legal fees to defend against hidden title issues, but also help to decrease ownership risks by providing a thorough title search prior to the issuance of either policy.

 

Refinance Transactions

If you're considering refinancing your mortgage, you may be surprised to see that you are required to purchase a new lender's policy of title insurance. This is because a lender's policy only provides coverage for the life of a loan. When a home is refinanced, the life of one loan ends and another begins. Thus, a new lender's policy for title is required. Because an owner's policy provides coverage for as long as you or your heirs hold an interest in the property, there is no need to purchase a new owner's policy when refinancing.