What is The purpose of Title Insurance? The purpose of title insurance is to protect the Lender and the Buyer against loss from mistakes which could have occurred in the abstract of the title and claims which cannot be discovered by an examination of public records -- the "hidden defects" Back to Top
Who Does it Protect? Most lending institutions won't loan money for a house or other property unless you provide a "mortgagee" title policy. This policy protects the lender's investment by paying the mortgage if a title defect voids the owner's/buyer's title. Investors who buy the new loan often require a mortgagee title policy. When you buy a house, title companies also issue an owner's policy. An owner's title policy protects your title against the covered risk set out in the policy. Back to Top
How Long Should I Keep My Policy? A standard owner's policy remains in effect as long as you or your heirs own the property or are liable for any title warranties made when you sell the property. Some newer enhanced owner's policies insure you forever. You should check with your title company to see what policies are available in your state. Therefore, you should probably keep your policy even after you sell your property.
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Is My Policy Still Active If I Refinance My Home? Most lenders require borrowers to buy new mortgagee title policies when refinancing. When the new loan pays off the existing loan, the old title policy is no longer in effect. A title company issues new policies in connection with new loans. Title companies must discount the premium if refinancing occurs within a certian period of time from the original loan date. This period varys from 3 years to 10 years depending in which state you are located. Back to Top
What Does A Title Policy Cover? The answer depends on whether you have a standard or enhanced policy. With a standard policy, if someone claims an interest in your property, the title company will pay for any actual loss and defend your title in court when:
1. A deed or other document in your chain of title is invalid as a result of: (a) forgery; (b) fraud against the rightful owner; (c) a signature given under duress; (d) a signature by someone legally incompetent to sign; or (e) someone claiming to be someone else.
2. A lien against your title exists because a previous owner failed to pay: (a) a mortgage or deed of trust; (b) a judgment, tax or special assessment; or (c) a charge by a homeowner's or condominium association. If you receive notice of a previous lien, immediately contact the title company and follow your policy's claim filing procedure. Failure to do so could jeopardize your claim.
3. A lien exists for labor and materials furnished by a contractor without your consent. Generally, your policy protects you if you buy your house already built, but not if you own the land and contract with a builder to build your home. Consult an attorney about your rights.
4. Leases, contracts or options on your land weren't recorded in the public records and disclosed to you.
5. A notary public erred or someone: (a) failed to properly sign a document in your chain of title; (b) made an error in recording the document at the county clerk's office; or (c) failed to deliver the deed according to statutory requirements.
6. The title policy failed to disclose legal restrictions on how you can use your property.
7. An easement exists that isn't in public records and that you don't know about. The title policy assures you a legal right of access to your property. This means that you have a right to travel from your property to a public street or road.
8. Other liens or encumbrances on your title exist but aren't listed in the policy exceptions.
With an enhanced policy, the title company will cover everything listed above, plus many new valuable coverages and protections, including building permit violations and post policy forgery. You should contact your title company for more specific information. Back to Top
What Does A Title Policy Not Cover? Title insurance doesn't protect you from problems you create or problems unrelated to your or the lender's property interests. It also doesn't cover losses listed under your policy's exclusions or exceptions. Discuss these exceptions with your attorney before closing any real estate purchase and whether an enhanced policy is right for you. Schedule B of your title policy lists exceptions and exclusions.
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