WHY DO YOU NEED TITLE INSURANCE?
The purchase of real estate is probably
the single largest investment you will make in your lifetime.
A lender goes to great lengths to
minimize the risk of lending you the money you need to buy a
home. First, your credit is checked as an indication of your
ability to pay back your loan.
Then, your lender goes a step further.
The lender makes sure that the quality of the title to the
property you are purchasing and which you will pledge as
security for the loan is satisfactory. The lender does this by
obtaining a loan policy of title insurance.
THE LOAN POLICY DOES NOT PROTECT
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
not be knowable at the time of sale.
This policy only protects the lender’s
interest. It does not protect you. That is why you need an
owner’s policy, which can be issued at the same time as the
WHAT DANGER OF LOSS CAN YOU FACE?
If a lender has title insurance protection and
you do not, what possible danger of loss can you face?
As an example, you have purchased a home
for $100,000. You have a down payment of $20,000 and your
lender holds an $80,000 mortgage lien. The lender has title
insurance coverage protecting its interest up to $80,000.
However, your $20,000 is not covered.
What if some matter arises affecting the
past ownership of the property? The title insurance company
will only defend and protect the interest of the lender. You
would then be required to assume the financial burden of your
own legal defense. If your 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 an assignment of your debt.
You will be out your down payment, other equity in the
property which you have accumulated and your home. And you
will still owe the remaining balance on the note.
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. However, 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.
Here are just a few of the most common
hidden risks that can cause a loss of title or create an
encumbrance on title:
Title insurance will pay for defending
against any lawsuit attacking your 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 you, or your heirs, retain an interest in the
property, or have any obligation under a warranty in any
conveyance of it. Owner’s residential title insurance, issued
simultaneously with a loan policy, is the best title insurance
value you can get.
By combining expertise in risk elimination
at the time of issuing a policy, and protection against hidden
risks as long as the policy remains in effect, your title
insurer protects against title loss.
The peace of mind in knowing that the
investment you have made in your home is a safe one.