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Key Benefits of Title Insurance

Introduction

When you purchase your new home you are required by the bank to purchase title insurance. Those of you who had never owned a home before wanted to know what it is, and why you are required to purchase it. Title Insurance protects your home and the land that it sits on against a number of things, most of which occurred in the past before you ever thought about the home. Are you insured? If you closed on your home with a mortgage loan, yes, you have a policy that protects your mortgage, but you may not have a policy that protects you.

Title insurance protects your property from the following possibilities:

  • Clerical Error made at the courthouse when an earlier deed was recorded.
  • Instrument signed by a minor.
  • Improper legal description.
  • Forged signatures.
  • A married signer who represented himself as single.
  • The title is taken as a result of an improperly probated will.
  • Confusion of title resulting from similar names.
  • A deed signed by someone who claimed to own the property, but in fact, did not.
  • A deed signed by someone mentally incompetent.
  • A deed signed by someone whose power of attorney had expired.
  • Outright falsification of records.

If you purchased an existing home, the chances are that the seller of that home provided you with a title insurance policy in the amount of the purchase price of the home. Check your personal records from your real estate transaction to be sure. If you built a new home on your own land, there’s the possibility that your title insurance policy only covers the amount of the value of the land, if you had one to begin with when you purchased your land. To find out if you are underinsured, pull out all of your records from your real estate transaction. You need to look for a letter-size document that says “Title Insurance Policy” on the front of it. Under the front cover is the actual policy. It will tell you on the first page of the policy the amount of coverage you have.

First American Title Insurance Policy:

An Owner’s Title Insurance Policy is your best protection against potential defects that can remain hidden despite the most thorough search of public records. A Lender’s Title Insurance Policy also exists to protect your mortgage lender’s interest. For a one-time premium, First American agrees to reimburse you for covered losses suffered due to undetected defects that existed prior to the issue date of your First American policy, up to the amount of the policy. Unless specifically excluded, your First American Title Insurance Policy also provides for legal defense costs.

Your First American Title Insurance Policy protects you against potential defects such as:

  • Forged deeds, mortgages, satisfactions, or releases,
  • Deed by a person who is mentally incompetent,
  • Deed by person in a foreign country, vulnerable to challenge as incompetent, unauthorized, or defective under foreign laws,
  • Deed challenged as being given under fraud, undue influence or duress,
  • Deed signed by mistake (grantor did not know what was signed),
  • Deed executed under falsified power of attorney,
  • Undisclosed divorce of one who conveys as sole heir of a deceased former spouse,
  • Deed affecting property of a deceased person, not joining all heirs,
  • Deed recorded but not properly indexed so as to be locatable in the land records,
  • Undisclosed but recorded federal or state tax lien,
  • Undisclosed but recorded judgment or spousal/child support lien,
  • Undisclosed but recorded prior mortgage,
  • Undisclosed but recorded boundary, party wall, or setback agreements,
  • Misinterpretation of wills, deeds, and other instruments,
  • Discovery of later will after probate of the first will,
  • Erroneous or inadequate legal descriptions,
  • Deed to land without a right of access to a public street or road,
  • Forged notarization or witness acknowledgment,
  • Deed not properly recorded,
  • Deed to a purchaser from one who has previously sold or leased the same land to a third party under an unrecorded contract, where the third party is in possession of the premises.

The Benefits of Title Insurance

Title insurance provides coverage against financial loss arising from covered defects in the title to real property. 

Benefits for the Homeowner

“Do I need title insurance?” “Yes.” For many homeowners, their property is their largest investment and that’s worth protecting! An Owner’s Policy provides you with a range of benefits, including:

  1. Protection for as long as you or your heirs own the property,
  2. Protection from the costs, attorneys’ fees and expenses of defending against any matter insured by the policy,
  3. Protection against certain covered risks not exceeding the amount of insurance, including a defect in title caused by:
  • Forgery or fraud,
  • The lien of real estate taxes or assessments due and payable, but unpaid,
  • No right of access to and from the land,
  • Unpaid mortgages and other liens,
  • Easements or rights of way, limiting the use of the property,
  • Unmarketable title,

In addition, when you buy title insurance, you’ll also benefit from the peace of mind knowing you’ll be protected from financial loss from covered claims. If you decide to sell your property, title insurance can protect you from financial loss if the sale falls through due to a covered defect in your property’s title.

Benefits for the Lender 

A Lender’s Policy, which is typically paid for by the homeowner, protects the mortgage lender from financial loss for covered risks and ensures that the mortgage is the only lien against the property. Lenders know the value of protecting their investment and insist on title insurance for that reason. This type of policy protects only the lender’s interest in the property.

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