What Is Title Insurance?
Title Insurance is insurance that protects either a homeowner or a lender against a claim being made against the title to the property. An Owner’s Title Insurance Policy protects the purchaser against the cost of a title claim and the cost of having to defend such a claim. A Lender’s Title Insurance Policy similarly protects the lender against a claim and the expenses or loss that it could incur if a claim is made against the property upon which the lender has issued a loan. The premium for the Title Insurance Policy is paid once, and the Policy remains in effect for the entire time that the owner owns the property, or in the case of a lender, for the entire term of its mortgage. The Title Insurance Policy also provides marketability coverage, which means that it also insures that an owner can sell his property free from any claims that would be covered by the Owner’s Title Insurance Policy.
How Is Title Insurance Issued?
Ashley Title Company will order title evidence from one of its title underwriters, who will deliver the relevant documents relating to the property to Ashley Title Company. Ashley Title Company’s attorney will examine those documents to determine if title is clean and marketable, or if there are any title defects that must be cured before closing. Ashley Title Company then issues a title commitment, and when it is clear that the requirements for delivery of clean and marketable title can be accomplished at or before closing, the closing is scheduled. When the closing has been concluded, Ashley Title Company as agent for one of its national underwriters will issue a Title Insurance Policy, which is shortly after closing along with the original recorded Warranty Deed.
Is the examination of title by the title company sufficient without the need for title insurance?
No, a title examination is only as good as the records that the title underwriter provides. There are a variety of title problems that could arise, and without a Title Insurance Policy, there is no insurance coverage to protect the homeowner or the lender in the event that a title problem occurs. By purchasing a Title Insurance Policy, the risk of any of these potential title problems is passed to the title underwriter, and away from the homeowner or the lender. The kinds of title problems that could occur are numerous, and the following is a list of a few of them:
⦁ Forged documents of ownership
⦁ Deeds signed by mistake or under duress, which are subsequently challenged after closing
⦁ Undisclosed prior mortgages or tax liens that were not satisfied by a previous owner
⦁ A disgruntled partner or spouse challenging a transfer by his or her partner or spouse after the closing
⦁ A misfiled or misposted document by the clerk’s office which effects the title to the property, but which did not show up in the title records because of the misfiling
⦁ A document being recorded during the “gap” period between the most recent update of title (which may be up to several weeks before closing) and the date of recording of the homeowner’s deed.
Under all of these circumstances, a Title Insurance Policy would insure the homeowner or lender against the claim being made against the title to the property. Without a Title Insurance Policy, the homeowner or lender would have to defend the claim on its own.
Am I Required to Purchase Title Insurance?
Almost every lender requires that a Lender’s Title Insurance Policy be issued, and the cost of that policy is generally borne by the homeowner. A homeowner is not required to purchase its own Owner’s Title Insurance Policy. However, it would be prudent for a homeowner to purchase its own coverage since the Lender’s Title Insurance Policy does not protect the homeowner, and when a mortgage is issued as part of a purchase transaction, the additional cost of issuing the Owner’s Title Insurance Policy is relatively nominal. In a transaction where no lender is involved, it is even more important that a homeowner purchase title insurance, since it is the homeowner’s total investment (as compared to only the down payment when a loan is involved) that is at risk in the event of a title claim. The one time premium for an Owner’s Title Insurance Policy is a very worthwhile investment in the security of your home.