Frequently Asked Questions

WHY DO YOU NEED TITLE INSURANCE?

To protect possibly the most important investment you'll ever make - the investment in real estate. A lender goes to great lengths to minimize the risk of lending money for the purchase of real estate. First, credit is checked as an indication of the borrower's ability to repay the loan. Then, the lender seeks assurance that the quality of the title to the property to be acquired and which will be pledged as security for the loan is satisfactory. The lender does this by obtaining a loan policy of title insurance.

DOES THE LOAN POLICY  PROTECT THE BORROWER?

No, the loan policy protects the lender against loss due to unknown title defects. It also protects the lender's interest from certain matters which may exist, but may not be known at the time of the sale.
But, this policy only protects the lender's interest. It does not protect the borrower. That is why a real estate purchaser needs an owner's policy, which can be issued at the same time as the loan policy, usually for a nominal one-time fee.

WHAT TYPES OF POLICIES ARE AVAILABLE TO ME AS A HOMEOWNER?

For the average property owner, there are two different types of title insurance policies that you need to be aware of:

Owner's Title Insurance Policy
Mortgagee's Title Insurance Policy

Since 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 Mortgagee's Title Insurance 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 you have made cannot be lost because of a problem or defect with the title.

WHAT IS THE DANGER OF LOSS?

If the lender has title insurance protection and the owner does not, what possible danger of loss exists? As an example, assume real estate was purchased for $100,000. A down payment of $20,000 is made, and a lender holds an $80,000 mortgage lien, or beneficial interest. The lender acquires title insurance protecting the lender's interest up to $80,000. But the purchaser's down payment of $20,000 is not covered. What if some matter arises affecting the past ownership of the property? The title insurance company would defend and protect the interest of the lender. The purchaser, however, would have to assume the financial burden of his or her own legal defense. If the defense is not successful, the result could be a total loss of title. The title insurance company pays the lender's loss and is entitled to take an assignment of the borrower's debt. The purchaser loses the down payment, other equity in the property that may have accumulated, and the property. And the balance on the note is still due!

HOW CAN THERE BE A TITLE DEFECT IF THE TITLE HAS BEEN SEARCHED AND A LOAN POLICY ISSUED?

Title insurance is issued after a careful examination of copies of the public records. But even the most thorough search cannot absolutely assure that no title hazards are present, despite the knowledge and experience of professional title examiners. In addition to matters shown by public records, other title problems may exist that cannot be disclosed in a search.

WHAT TITLE INSURANCE PROTECTS AGAINST

Here are just a few of the most common hidden risks that can cause loss of title or create an encumbrance on title:

•  False impersonation of the true owner of the property
   

•  Forged deeds, releases or wills
   

•  Undisclosed or missing heirs
   

•  Instruments executed under invalid or expired power of attorney
   

•  Mistakes in recording legal documents
   

•  Misinterpretations of wills
   

•  Deeds by persons of unsound mind
   

•  Deeds by minors
   

•  Deeds by persons supposedly single, but in fact married
   

•  Liens for unpaid estate, inheritance, income or gift taxes
   

•  Fraud

WHAT PROTECTION DOES TITLE INSURANCE PROVIDE AGAINST DEFECTS AND HIDDEN RISKS?

Title insurance will pay for defending against any lawsuit attacking the title as insured, and will either clear up title problems or pay the insured's losses. For a one-time premium, an owner's title insurance policy remains in effect as long as the insured, or the insured's heirs, retain an interest in the property, or have any obligations under a warranty in any conveyance of it. Owner's title insurance, issued simultaneously with a loan policy, is the best title insurance value a property owner can get. 

HOW DO I OBTAIN TITLE INSURANCE AND WHAT DOES IT COST?

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 cost depends upon the purchase 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.

ISN'T PURCHASING BOTH THE OWNER'S AND MORTGAGEE'S POLICIES A DOUBLE PAYMENT OR DUPLICATE COVERAGE?

No, it's not a double payment or duplicate coverage. The Mortgagee's Policy protects the lender's interest only so long as the loan is outstanding and only in the amount of the balance of the loan at any given time. The Owner's Policy protects you up to the face amount of the policy during your ownership and after you have sold the property if you have warranted the property to your subsequent buyer. After arranging a loan, you pay a premium for the purchase of the Mortgagee's Policy based on the amount of the loan. If you desire to purchase an Owner's Policy at the same time, you pay an additional premium only for the difference that covers your equity or investment in the property together with a small "simultaneous issue fee." Because of this, you do not pay twice for the two policies. If you buy your Owner's Policy separately, you pay the full premium for the policy. Likewise, if you refinance or borrow additional money at a later time, you can expect to pay additional premiums for the new policies, if required.