- Title Insurance Basics
- What is an attorney’s title opinion or certificate?
- Why do I need title insurance?
- What types of policies are available to me as a homeowner?
- What are the risks?
- How does title insurance protect against these hidden risks & Defects?
- How do I Obtain title Insurance and what does it cost?
- Is my Title Policy still good if I refinance?
Title insurance protects you and your lender if someone challenges your property title because of title defects unknown at the time you bought the policy. Possible title defects include: errors in deeds, mistakes made in examining records, forgery, undisclosed heirs, missing heirs, liens for unpaid taxes and liens by contractors. Before issuing a policy, Title Company’s check for defects in your title by examining public records, including deeds, mortgages, wills, divorce decrees, court judgments, tax records, liens, encumbrances and maps. The abstract determines who owns the property, what debts are owed against it and the condition of the title, Title companies also handle property closings and hold earnest money in a trust account until a purchase is complete.
The attorney examines and passes judgment on the abstract and issues an opinion as to whether the title is good or bad. Many times the attorney will advise, in a title opinion, that certain matters need to be corrected and will recommend the steps to be taken by which the matters can he corrected. However, the attorney’s opinion does not cover many non- record defects, which can be fatal to the title.
Title Insurance is an insurance policy or contract issued by a title company. It protects you, the purchaser or owner, against a loss that may arise by reason of defect in your ownership or an interest you have in real property. In addition, the title insurance company agrees to defend you in court if there is an attack on your title. It will cover attorney and court expenses or pay a loss caused by the defect in title up to the face amount of the policy subject to the terms listed in your policy.
For the average property owner, there are different types of title insurance policies that you need to be aware of:
•Owner’s Title Insurance Policy
•Loan Title Insurance Policy
Since the most property owners mortgage or borrow money at the time of purchase or during ownership, the lender can be expected to request protection of its investment against loss. Lenders know that many things can cause loss of title or that expenses are incurred while defending an attack. They insist upon a Loan Title Policy to protect their stockholders’ and investors’ investment in your property.
An Owner’s Title Insurance Policy protects your investment (equity) as the buyer or owner of the property. As the owner, you should want to have the same assurance as the lender that the investment cannot be lost because of a problem or defect in the title.
North Louisiana Land and Title offers a special rate when a home buyer purchases both types of insurance at the same time. This is called a simultaneous issue and is considerably more economical than buying separate mortgagee and owner’s title insurance policies. During a simultaneous issue, both policies are issued for the owner’s policy rate, plus a small simultaneous issue fee. Serious consideration should be given to acquiring an owner’s policy whenever you purchase real estate.
There are numerous defects or problems that can arise to cause an attack or loss of the title to your property. Some of these include problems not disclosed by the most careful search of public records (the title search). Hidden risks can cause a total loss of your investment or heavy legal expenses in the defense of an attack on the title. Some title problems may show up months or years after the original purchase of the property. The following are examples of matters that can cause loss of title or an expensive lawsuit.
•Forged deeds, releases, wills or other legal documents
•Failure of spouses to join in conveyances
•Undisclosed or missing heirs
•Deeds for minors, aliens or persons of unsound mind
•Errors in indexing of public records
•Liens for unpaid taxes including estate, inheritance, income or gift taxes
•Erroneous reports furnished by tax officials
•Mistakes in recording legal documents
•Deeds from defunct corporations
Title insurance defends you in the lawsuit attacking your title and either corrects the title problem or pay the insured’s losses up to the face amount of the policy. The policy also protects you after you sell the property for defects occurring prior to your ownership that cause a loss to a purchaser if the title was warranted by you. The title policy guarantees that at the date the deed was filed for record placing title in the name of the insured, the title was free of defects apart from those “excepted to” in the policy. The policy does not guarantee an actual amount of land. It guarantees that there are no buildings or improvements belonging to someone else located on the insured land when an acceptable survey is furnished to the title company. An additional premium is paid to amend the standard survey exception.
It’s easy! Simply inform the title company, attorney or agent handling the closing of your property that you want to purchase an Owner’s Title Insurance Policy. In most states, the premiums for the title insurance policies are regulated by the state insurance commission or some other governmental body. You only pay the premium once. The costs depends the price of the property, and your policy amount must be equal to the purchase price. Your closing Agent will quote you that price either upon your inquiry or at the time of closing.
Most Lenders require borrowers to buy new loan policy when refinancing. When the new loan pays off the existing loan, the old title policy is no longer in effect. A new policy is issued in connection with the new loan.