Sometimes it can be difficult to understand how title insurance can protect you. To sum it up, it offers you peace of mind. After you purchase and close on your home, you feel it is yours, even if you owe a mortgage on it. You decorate and move in and start a new journey in your life. But what if, many years ago, a deed was forged on the property you just purchased? Or previously unknown heirs of a former owner show up? These claims could go back months, years, or even decades. Having a title insurance policy can protect you should something like this arise after you take possession of the property.
Title Insurance is the only insurance you can purchase that insures the past. It describes your property in detail and states any limitations you have to ownership (like mineral rights and easements.) Before closing on your property, your owner’s policy was issued and the title company searched public records, maps, and documents for you. After the title company collects all their data they examine and interpret it before issuing the title policy.
The title policy will tell you what your title company will do for you should an issue arise. The title company usually agrees to defend your title in court at their own cost, correct or clear any problems on the title, and to pay you for your loss in the event they cannot defend your title successfully in court.
You do not pay monthly or quarterly premiums on a title policy. There is just a one time charge at the closing and this premium is issued in an amount equal to the purchase price you pay. Of course, the greater the coverage given, the higher the premium.
The protection you get from an owner’s title insurance policy is no better than the company that underwrites it. If they go out of business, you are left holding the bag.
Title insurance can be very helpful when purchasing property whose legal history is unknown. It reduces the buyers risk.
There can be many risk factors when purchasing a home. So title insurance reduces that risk for the homeowner. Among the many risks against which title insurance protects you are:
• Confusion from similarity of names
• Forged documents
• Signatures of minors or mentally incompetent persons
• Mistakes in recording legal documents
• Undisclosed or missing heirs
• Invalid divorces
• Misrepresentation of marital status
• Unpaid taxes
• Clerical errors in public records
• Wills not probated