Since buying a home is one of life's largest investments, you will want to be certain it is safely yours. Most homeowners provide for the security and safekeeping of their homes by insuring them against hazards such as fire, theft, and weather damage. But there is another hazard that can pose an even greater risk to homeownership……..defects in the title to your property can cause you to lose all or part of your investment. Even the most diligent search of the public records could fail to disclose a number of title defects. A few of the problems that could suddenly surface are forged wills or deeds, title transferred by someone under age, a married person conveying real estate without their spouse, fraudulent impersonations, secret marriages, undisclosed heirs, invalid divorces, and false affidavits. Without the protection of title insurance, your investment is in jeopardy.
Fortunately, there is a way to protect your investment from these defects by purchasing owner's title insurance.
Following are most commonly asked questions regarding title insurance. We've also included a few horror stories showing how such hidden hazards can arise unexpectedly and threaten homeownership. We hope that this information helps you to better understand the value of title insurance in protecting your investment.
That depends on the claim. In an extreme case, you could lose your entire home and property – and still be liable to pay off the balance of your mortgage. Most claims aren't that dramatic, but even the smallest claim can cost you time, money and aggravation, not to mention the cost for a legal defense.
If a claim is made against your property, title insurance will, in accordance with the terms of your policy, assure you of a legal defense – and pay all court costs and related fees. Also, if the claim proves valid, you will be reimbursed for your actual loss up to the face amount of the policy.
Not necessarily. A deed is just a document by which the right of ownership in land is transferred, whatever that right may be. It's not proof of ownership, and it doesn't do away with rights others may have in the property. In addition, a deed won't show you liens or claims that may be outstanding against the title.
An attorney's opinion is based on a search of the public records. So, once again, even the most exhaustive search of these records may not reveal everything. Unlike a title insurance company, an attorney is not liable if you should suffer loss because of “hidden” hazards in the title.
Because the owner could, in very short time, do many things to encumber the title. For example, he could grant easements or construct improvements that encroach on adjacent property. He could get married or divorced, or have a lien filed against the property. It is necessary to conduct an up‐to‐date title search to uncover any such problems.
A title insurance policy insuring the builder does not protect you. Also, a great many things could have happened to the land since the builder's policy was issued. Liens, judgments, and unpaid taxes for which prior owners were responsible may be disclosed after you purchase the property – causing you aggravation and costing you money.
Yes. Basically, there are two different types of policies – a loan policy and an owner's policy. The Loan policy protects the lender's interest in the property as security for the outstanding balance under the buyer's mortgage. The Owner's policy safeguards the buyer's investment or equity in the property up to the face amount of the policy.
There are two types of Owner's title insurance policies certified by the American Land Title Association® (ALTA®) – the Standard Owner's policy and the Enhanced Homeowner's policy (ALTA Homeowners' Policy).
What is the difference between Standard Owner's Policy and Enhanced Homeowners' Policy?
The Standard Owner's policy protects you from defects and liens in the history of your title through the date and time your deed is recorded in the public records.
The Enhanced Homeowner's policy takes your protection to a higher level by providing coverage for many additional risks, including some that might occur after the deed has been recorded. The Enhanced Homeowner's policy protects against many common, frustrating problems, and the policy protects your investment for as long as you or your heirs own the property. Read on for a description of some of the additional coverages you'll receive when you upgrade to a Homeowner's policy.
More Coverage, More Peace of Mind
Building Permit Violation Coverage: Covers up to $25,000 after a deductible equal to the lesser of 1% of the policy amount or $5,000. This coverage applies if the policyholder has to remove an existing structure (excluding boundary walls and fences) built by a previous owner who did not obtain the required permits.
Subdivision Coverage: Covers up to $10,000 after a deductible equal to the lesser of 1% of the policy amount or $2,500. This coverage applies if the policyholder cannot close a sale, secure a loan or obtain a building permit because the land was improperly subdivided prior to purchase.
Address Coverage: Address coverage insures that the home has the same address as the property insured in the policy.
Restrictive Covenant Violations Coverage: This type of coverage protects against loss of title if someone attempts to enforce an existing restrictive covenant due to a violation that occurred before the policy date.
Zoning Coverage: Zoning coverage protects if the policyholder is forced to remove or remedy an improvement because it violates zoning laws. Protection for forced remedy of violations is subject to a deductible and a maximum dollar amount.
Post-policy Coverage: Post-policy coverage protects against possible post-policy ownership claims.
Enhanced Access Coverage: Enhanced access coverage protects actual pedestrian and vehicular access to the property.
Encroachment Coverage: This protects against someone building a structure (excluding boundary walls and fences) that encroaches on the insured property.
Supplemental Taxes: This coverage protects against supplemental taxes for prior construction, change of use or ownership.
Coverage for Structure Damage From Extraction of Minerals, Water and Other Substances: This coverage protects all existing structures and landscaping on property, including future improvements; and protects against damage caused by others using the land for extraction and development of minerals, water and other substances.
Automatic Coverage Increases: Each of the first five years, the policy amount will automatically increase by 10% in value, up to a total of 150%.
Unlike other ongoing expenses of homeownership, title insurance is paid with a one-time premium at the settlement.
Title problems are rare but terrible, so if you have an insurance policy you can feel confident that not only will the policy cover an attorney's research and court costs, it will also pay any back loans or liens if they are legitimate”. The title insurance company will handle the entire issue without having to charge you anything once you've paid that initial premium.
Probably a lot less than you think. Charges vary in different sections of the country, but generally the cost of title insurance amounts to about one percent, or less, of the cost of the property. And unlike other insurance premiums, which must be paid annually, a title insurance premium is paid one time only, usually at settlement.
For as long as you or your heirs retain an interest in the property and, in some cases even beyond.
A SMALL COST FOR YEARS OF PROTECTION – The real estate you own represents stability, permanence and the hope of the future. Don't take a chance and let your property be taken from you because of a flaw in the title. It makes good sense, for the relatively small amount it costs, to protect yourself with title insurance.