Most insurance protects you against problems that may happen in the long run; title insurance protects you against problems from yesteryear. Buyers take insurance out to protect them in case the seller doesn’t have a valid title to the property due to fraud or due to legal problems that go back to long before the seller owned the property.
Title insurance has been around at least according to the Old Republic Title Insurance Company. An advertisement from the middle of the decade proves that the purpose was the same then as it is today –to protect buyers from”loss from defective titles, liens, and encumbrances” so that they can buy property with confidence.
Title insurance protects against”flaws” in the title to the property you are buying, the California Land Title Association states. These could consist of someone claiming that he’s the real legal proprietor, or that she’s an easement allowing her to cross your land at will or that he has a construction lien on the buildings that the seller did not mention. If you fight for your property in courtroom, title insurance pays the legal fees; if you lose money due to the flaws, title insurance covers your losses.
Unlike most insurance companies, title insurance businesses work to eliminate the risk they cover against. From the time you close on the property, your insurance company will probably have researched it thoroughly to be certain that the seller has legal title, or to notify you if there are serious questions regarding her possession. The Complete Title provider says shared sources of title problems include fraud, forgery, conflicting wills and missing heirs.
When you shut land, you pay a one-time title insurance policy premium. In case you need to defend your title in court, the California Land Title Association states, insurance policy for your legal fees will make up for your premium. It is possible someone could sue you in the belief that the property belongs to them, but in the event the insurer failed its study, there shouldn’t be any valid title challenges. According to the Insure website, title insurance companies only spend 5% of their premiums paying off claims, compared to 70% for homeowners insurance businesses.
Title insurance businesses issue two types of coverages. When you buy an owner’s policy, it insures not only you, but your heirs for as long as they own the property. If they market it with a warranty deed–one that guarantees their title is good–the insurance company stands behind the deed, too, Insure states. After you close, you will also must purchase lender’s title insurance, which protects your mortgage lender’s interest in your property from competing claims.