You purchase homeowners insurance to protect yourself financially in case something happens to your property or its contents. However homeowners insurance won't protect your financial interests if a matter arises regarding past ownership of your property. That is where title insurance comes in. Only the title to the land and not the land itself can be purchased. So, unless a homeowner possesses a clear title, he or she risks losing his/her home and the land under it. Title insurance guarantees the title as reported. Actually there are two types of title insurance: lender policy and the owner's title insurance. Most lenders require a loan policy when they issue you a loan to protect their interest (the amount they loaned you) should a problem arise. The policy amount decreases each year and eventually disappears once the loan is paid off. Therefore the owner should also have title insurance to protect his/her financial interest. Only owner's title insurance fully protects the buyer. Should hidden defects surface at any time challenging an owners rights, the title company will defend the title, in court, if necessary, and cover the owners losses up to the full value of the policy. But before title insurance is issued, the title company (or attorney, depending on the local practices and laws) performs a title search. A title search involves searching public land records to ascertain if the seller has the legal right to sell the property. The title company will: conduct a chain of title, which is a review of the owner history of the property, checking for who purchased the property, who sold it, and when; perform a tax search to verify the present status of taxes; conduct a judgment search to determine whether there are any general liens against the property; and, sometimes even, conduct on-site inspections to verify lot size, the location of improvements, and evidence of unrecorded easements. According to the American Land Title Association, 25 percent of title searches find a title problem that is fixed before the insurance is issued. At this point, you may be wondering why you even need insurance following an exhaustive title search. Unfortunately, its nearly impossible to guarantee a title is clear of hidden defectsthose circumstances that could find you in a tug of war over the property. Examples of hidden defects include mistakes in interpretation of wills and other legal documents, liens for unpaid estate or inheritance taxes, deeds by persons of unsound mind, impersonation of the real owner, forgery, missing or undisclosed heirs, falsification of records, and confusion stemming from similar names. Your home is probably one of your largest investments. For a one-time premium, you can have peace of mind for as long as you or your heirs retain the property. Talk with your real estate professional for more information on title insurance and selecting a title company. |
