What is title insurance?
Frequently Asked Title Questions
There are two types of policies:
- The owner policy, which offers protection to the homeowner and the homeowner’s heirs.
- The mortgagee policy, which provides protection for the mortgagee (lender) and its assigns.
These two policies are separate and distinct.
The lender typically requires their own title insurance policy to insure their interest in the property. The cost of this policy is paid for by the buyer / borrower at closing.
If the owner wishes title insurance, a separate policy must be purchased.
However, the new owner can reduce the cost by purchasing the two policies simultaneously.
The title insurance policies are issued shortly after closing. They are not issued at closing.
There is a one-time premium payable at closing by the buyer / borrower for both the lender’s and owner’s policy. Owner’s title insurance can only be purchased at the time you purchase a property. If you choose not to purchase an owner’s title insurance policy at the time of closing, you will not be allowed another opportunity to do so.
Protection begins immediately upon the recording of the appropriate documents and works backward in time.
Title insurance offers two types of coverage:
- First, it will pay to defend the insured’s title in a court of law.
- Second, it will pay the cost to remove a defect in the title on behalf of the insured to the extent of the policy limits.
Purchasers of property are correct when they assume that their attorney’s examination of the title to the premises and receipt of a warranty deed from the seller is generally sufficient to assure that they will have good title to the property.
However, title insurance provides two additional protections.
- First, if there is a problem, the title insurance company—not the new owner—will have to assume the financial burden of making a claim against the prior owner.
Second, there are several “hidden defects” that neither the seller nor the attorney examining the title is responsible for, which could affect your title. Examples include lost or forged deeds, deeds executed by incompetents, incorrectly indexed deeds, or improperly probated wills.
There are specific exceptions from the policy’s coverage, but they will be set forth on the policy as items not being covered.
Normally, those items found of record during the title search will not be covered, and these will be listed as “exceptions” to coverage.
For instance, most properties have one or more easements in favor of utility companies to permit the location of gas, electric, water, or sewer lines, which will be set out in the title insurance policy.
However, the policy insures that there are no easements other than those listed. We will be able to explain these items to you in more detail at the closing.