Title Insurance Explored

Title insurance is important when buying a home since it involves researching the public record to determine you’ll have all the ownership rights once you close.

The title insurance is in place in case a mistake was made in the title search and a person comes forward with a legitimate claim of ownership to your home. Should the claim be verified, your title insurance pays the new found owner his claim and you get to keep the house.

If you own a $300,000 home, the title insurance company may have to shell out $300,000 to make the claimant whole.

Ouch!

Title Insurance = Peace of Mind

Purchasing a home is probably the single biggest investment you will ever make. Before closing on the house, you’ll want to know that no other individual or entity has a right, lien or claim to the property.

Determining that your rights and interests to the property are clear is the business of a title insurance company.

For a modest, one-time title insurance premium, you will receive continuous title insurance protection in an amount equal to the purchase price of the property or its current market value. This premium typically includes your “owners” policy as well as the “lenders” policy.

One of the marked advantages of title insurance is that prior to a policy being issued, the title insurance company completes extensive research into relevant public records, maps and documents to trace ownership of the property and determine if anyone other than you has an interest in the property.

Through its research, the title insurance company can usually identify any title problems that may arise and have these problems cleared-up prior to closing.

Your title insurance owner’s policy will describe the property and outline any recorded limitations on your ownership. It will also set forth the title insurance company’s responsibilities should any claim covered by the policy terms arise.

Typically your title insurance will protect you from loss:

- if someone contests your title in legal action (the title insurance company will defend the title at no expense to you),

- or if there is a title defect that cannot be eliminated (the title insurance company will protect you from financial loss - up to the amount of the policy).

The ownership rights you hold in your home are most likely your largest single asset.

It pays to know no “title interloper” can come along and steal it from you.

How To Save Money on Title Insurance

To save money on title insurance, compare rates among various title insurance companies. Ask what services and limitations on coverage are provided under each policy so that you can decide whether coverage purchased at a higher rate may be better for your needs. However, in many states, title insurance premium rates are established by the state and may not be negotiable.

If you are buying a home which has changed hands within the last several years, ask your title company about a “reissue rate,” which would be cheaper. If you are buying a newly constructed home, make certain your title insurance covers claims by contractors. These claims are known as “mechanics liens” in some parts of the country.

The American Land Title Association has consumer title insurance information available at its website, www.alta.org.

Title companies have to make sure the title gets transferred properly. People always complain about title insurance. It is there to protect you.

When you refinance, you can’t just use the previous policy. If title and/or liens were not transferred properly on your new refinance, the title insurance company is responsible for that. The lenders require new title insurance to be assured they are lending on a clean title.

A couple hundred dollars every time you get a new loan is nothing compared to thousands and maybe hundreds of thousands of dollars if something goes wrong with the title to your house.

It is a no-brainer.

Good Luck

Author: Rob K. Blake
Published January 20, 2008
Modified February 26, 2008

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