Title insurance is used to ensure the credibility of the “record” title to a property as it is recorded in the local registry of deeds. While a careful review of a property’s deed is usually preformed by a certifying attorney before closing, defects can and do still go undetected. Title insurance is used to protect both lenders and property owners from losses due to these defects.
Protecting the interests of lenders and property owners is done in two parts. Loan Policies protect the lender’s interest in a property, while an Owner’s Policy is designed to protect the property owner.
The lender will always require a loan policy to protect its mortgage interest in the property, but often property owners go unprotected.
Why you should say “Yes” when asked if you want an Owner’s Title Insurance Policy at your closing.
An Owner’s Policy is your best protection against possible title defects that could result in claims against your property.
For a one-time premium, an Owner’s Policy is your best protection against potential title defects that could deprive you of your ownership rights. In the event of a claim, the title insurance company will either correct covered title problems or will reimburse you for insured losses up to the amount of the policy and will defend against any lawsuit attacking your title as insured.- The Loan Policy issued to your lender does not protect you. The lender requires a Loan Policy to protect its mortgage interest in your property. While the premium for this policy is included in your closing costs, it does not protect you, and you cannot make a claim if you suffer a loss.
- An Owner’s Policy insures against title defects that are not covered by an attorney’s certification of title. An attorney’s certification of title is an opinion of the quality of the “record” title based on a review of the public records at the registries of deed and probate. However, the certifying attorney may not be responsible for numerous title defects that would not be found despite the most thorough search of public records, such as:
- Forged documents
- Unknown creditors
- Undisclosed or missing heirs
- Missing signatures
- Mistakes in recording
- Incapacity of a grantor
All of these hidden defects and many more are covered by the Owner’s Policy. The attorney’s certification covers those matters that could reasonably be discovered during the time frame of the title search. An Owner’s Policy provides the added protection of covering title defects that existed anytime prior to the issue date of your policy.
- The Owner’s Policy can help you when you want to sell your property. Potential buyers or lenders may refuse to purchase or refinance your property if they believe the title is unmarketable. The Owner’s Policy insures against loss of damage that you may suffer as a consequence of the marketability issue, and may enable the sale or financing to go through by offering to insure the buyer or lender against any title defects that may exist.
- The Owner’s Policy provides you with immediate and expert legal support. Most claims arise through the rejection of title by the buyer’s attorney. When this happens, it is imperative that the extent of the defect is known immediately, that a plan of action is initiated to remove the defect, and that the work to clear the title is performed diligently and competently. Using in-house experience and knowledge, the title insurance company is able to zero in on the problem and assign attorneys who are experienced in correcting title defects. If the claim is covered by the Owner’s Policy, all work to remove the defect will be paid for by the title insurance company, including representation of our insured in a lawsuit to establish the title or remove an encumbrance. An Owner’s Policy may save you thousands of dollars in legal costs.
- To protect what may be the most important investment you will ever make. For a one-time premium, an Owner’s Policy remains in effect for as long as your heirs own the property. Owner’s coverage gives you the ultimate in peace of mind by protecting the title to your home.
- To get discounts on future refinances. When you refinance your home you will probably be entitled to a 40% discount. This means if you refinance twice over the time which you own your house. You will have saved almost the entire premium and your insurance is still in effect for the time.