Resources for Buyers

Most types of insurance cover incidents that may occur in the future, which is the case with health, life, auto, and homeowner’s insurance. The cost of these policies is based on the insurers’ estimation of how much they will likely pay out in claims over a given period. The volume of claims is typically high with these types of insurance.

Title insurance, on the other hand, is based on loss prevention, which means that a much larger percentage of the premium dollar is spent preventing title problems from occurring. These upfront costs cover searching, identifying, and eliminating risks that could result in a future claim.

The cost for title insurance is a one-time fee, as opposed to other lines of insurance that charge a monthly, quarterly, or annual premium over the life of the policy. When you consider the size of the asset being protected, title insurance is probably the best value among the majority of costs associated with closing on a new home.

Even after an exhaustive title search is performed and a title policy issued, sometimes a problem may surface that can threaten your home. If you only have a Loan Policy, where the outstanding loan is covered, your equity is not protected. A separate Owner’s Policy is recommended as it protects you for as long as you or your heirs own the property that is insured. It also covers legal expenses involved in defending the title on behalf of the homeowner.

A title search is an early step in the homebuying process to uncover issues that could limit your rights to the property. If a title issue is discovered, most often your title professional will take care of it without you even knowing. After the title search is complete, the title company can provide a title insurance policy.

If you’re buying a home, title insurance is a policy that protects your investment and property rights.

There are two different types of title insurance: an owner’s policy and a lender’s policy.

1. An owner’s policy is the best way to protect your property rights. Either the buyer or seller may pay for this policy. Ask your title professional how it’s handled in your area.
2. A lender’s policy is usually required by the lender and only protects the lender’s financial interests. The buyer typically pays for this policy, but that varies depending on geography. Ask your title professional how it’s handled in your area.

Owner’s title insurance protects your investment in your property from certain future legal claims regarding ownership of your property. For a one-time fee, you and your heirs* receive coverage for as long as you own your home. The owner’s policy also covers potential legal fees and court costs for settling claims covered by your policy.

Sometimes undiscoverable defects can come up after the title search. Under an owner’s title insurance policy, you are protected against certain undiscovered errors in the title. 

 

Title issues include unknown:

• Outstanding mortgages and judgments, or a lien against the property because the seller has not paid his taxes
• Pending legal action against the property that could affect you
• Unknown heir of a previous owner who is claiming ownership of the property

 

Unforeseeable title claims include:

• Forgery: making a false document 
• For example, the seller misrepresents the identity of the person who sold the property. 
• Fraud: deception to achieve unfair gain
• For example, someone steals your identity and either sells your house without your knowledge or consent, or takes out a second mortgage on the property and walks away with the money.
• Clerical error: inconsistent paperwork and historical records
• For example, an unforeseeable discrepancy in the property or fence line can cause confusion in ownership rights.

The one-time payment for owner’s title insurance is low relative to the value of your home. A typical title insurance policy costs around 0.5% of the home’s purchase price.

Your owner’s insurance policy lasts for as long as you or your heirs* own your property. Your life will change over time, but your peace of mind never will.

Closing is the final step in executing the homebuying transaction. It is the process that allows the transfer of ownership to occur. Upon completion of the closing process, you get the keys to your home!