A Title Agent’s Perspective on Title Insurance
By: Peter Casey Wall, CTP, Chief Operating Officer, North Star Title Agency
Hello future homeowners! As a title agent, I often get asked about title insurance. It might seem like just another step in the home buying process, but believe me, it’s one of the most important ways you can protect your investment and secure your property rights. Let’s break down some common questions to help you understand why **owner’s title insurance** is so crucial.
What Exactly is “Title”?
Simply put, your title is your right to own or use your property. It also outlines any limitations on those rights. Think of it as the legal foundation of your ownership.
What’s the First Step? The Title Search
Before you finalize your home purchase, a title search is conducted. This is an early step in the process designed to uncover any potential issues that could limit your rights to the property. Fortunately, if a title issue is found, your title professional will usually handle it without you even knowing. Once the title search is complete and any issues are resolved, a title insurance policy can be issued.
Understanding Title Insurance: Your Shield of Protection
If you’re buying a home, title insurance is a policy that protects your investment and property rights. It’s important to know that there are two types of title insurance:
- An owner’s policy: This is the best way to protect your property rights. In New Jersey, typically, the buyer pays for this policy, but be sure to ask your title professional how it’s handled in your area.
- A lender’s policy: This is usually required by the lender and only protects the lender’s financial interests**. While the buyer typically pays for this policy, this can also vary depending on where you live, so again, check with your title professional.
Why Should a Homeowner Purchase Owner’s Title Insurance?
For most of us, a home is the largest investment we’ll ever make. Owner’s title insurance protects your investment in your property from certain future legal claims regarding ownership. For a one-time fee, you and your heirs receive coverage for as long as you own your home. This peace of mind is invaluable. The owner’s policy also covers potential legal fees and court costs for settling claims covered by your policy.
What Unexpected Issues Can Title Insurance Protect You From?
Sometimes, even with a thorough title search, undiscoverable defects can surface after closing. This is where owner’s title insurance truly shines, protecting you against certain unforeseen errors in the title. These title issues can include unknown:
- Outstanding mortgages and judgments, or a lien against the property because the seller hasn’t paid their taxes.
- Pending legal action against the property that could affect you.
- Unknown heirs of a previous owner who are claiming ownership of the property.
Furthermore, owner’s title insurance can protect you from unforeseeable title claims like:
- Forgery: This involves the making of a false document, for example, if the seller misrepresents the identity of the person who sold the property.
- Fraud: This is deception to achieve unfair gain, such as someone stealing your identity to sell your house without your knowledge or taking out a second mortgage and disappearing with the money.
- Clerical error: This can involve inconsistent paperwork and historical records, for instance, an unforeseeable discrepancy in the property line that causes confusion about ownership rights.
What About the Cost and How Long Does Coverage Last?
The good news is that the one-time payment for owner’s title insurance is relatively low compared to the value of your home. A typical policy costs around 0.5% of the home’s purchase price. And remember, your owner’s insurance policy lasts for as long as you or your heirs own your property. In cases of the enhanced coverage owner’s policy, coverage lasts for the term of the insured’s natural life.
Title Insurance and the Closing Process
Closing is the final step in executing your homebuying transaction, where the transfer of ownership occurs. The work done by the title company, including the search and ultimately the title insurance policy, is a crucial part of ensuring a smooth and secure closing process. Upon completion, you finally get those keys!
Want to Know More?
The American Land Title Association is a great resource for educating homebuyers about title insurance and protecting your property rights. You can check out www.homeclosing101.org to learn more about title insurance and the entire home closing process.
Please remember: This information provides a brief overview of insurance coverages and is for informational purposes only. Actual coverages may vary by state, company, or locality. You might not be eligible for all described insurance products, coverages, or services. For exact terms, conditions, exclusions, and limitations, please contact a title insurance company authorized to do business in your location.
Protecting your investment is paramount, and owner’s title insurance is a smart way to do just that. Don’t hesitate to reach out to me or another title professional with any questions you may have!