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Title Insurance FAQ
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Even if your mortgagee has title insurance, that policy does not protect YOU. Only OWNER'S TITLE INSURANCE will assure your peace of mind by protecting YOUR interest and that of your heirs FOREVER.
- What is Title Insurance?
Title Insurance is a contract to indemnify or protect the insured party against losses arising through defects in the title of a specific parcel of real estate.
Should the buyer finance the purchase, the mortgage lender will require a Lender's Title Insurance Policy. This policy is designed to protect the lender against applicable losses in the event the title to the property is found to be defective. This policy will not provide title insurance protection to the buyer. Owners title insurance is available to the buyer and will insure that the home is protected from loss due to any defects in the title.
- But I thought the bank or lending institution always had the title insured
It usually does. But its policy only insures its own interest in your property. You could lose your equity if you don't have OWNER'S TITLE INSURANCE.
- Couldn't an attorney search the title and render an opinion?
Yes, and a search by an attorney or expert titleman takes place before a policy is issued. But the insurance goes further. If a defect in the title-any defect not shown as an exception in your policy should turn up later, you are protected against loss by your title insurance within the limits of the policy.
- Just what is a title defect?
It is any one of a number of things that could jeopardize your interest. It could be an unsatisfied mortgage, lien, judgment or other recorded claim against the property. It could arise through easements, use restrictions or other existing covenants. Or it could be a hidden risk. To name only a few of these; fraud or forgery in previous documents; improperly executed deeds; the marital status of previous owners; deeds executed under expired powers of attorney. The list could go on and on. A look at court records would reveal many instances of these and hundreds of other ways in which parties you may never have heard of could claim an interest in your home.
- You mean an OWNER'S TITLE INSURANCE policy insures against these title defects occurring?
No. But OWNER'S TITLE INSURANCE does eliminate the risk of loss to you through claims -against the title as described in your policy. The insuring company assumes all legal expenses involved in adjudicating claims and protects you against any loss whatever arising from claims attacking your title, within policy limits, even though they may occur through errors made in public records.
- If I didn't have OWNER'S TITLE INSURANCE how serious would a claim against my home be to me personally?
It could be very serious. It would mean you would have to withstand all expenses involved with the defense of your rights, and could even result in complete loss of your equity if your defense proved unsuccessful.
- Is OWNER'S TITLE INSURANCE as important to me as fire or property damage protection?
Emphatically yes. Loss from title deficiencies can be as great as, or greater than, fire or other damage.
- If OWNER'S TITLE INSURANCE is so important and covers so much, isn't it expensive?
No. OWNER'S TITLE INSURANCE is one of the most inexpensive forms of insurance. Rates vary from region to region and depend on the amount of service required. But the premium is surprisingly low in relation to the cost of your home - one of the most important purchases you will ever make.
- And do I pay only one premium?
Yes. And this one modest premium insures your home for as long as you or your heirs have an interest in it. It's best to have your owner's policy issued at the time you take title to your property. This eliminates the need to pay for having the title searched a second time.
- What can you tell me about the Virginia Land Title Association?
The Association's membership includes virtually every title insurance underwriting company doing business in Virginia, as well as a great many title agents.
Its objective is to establish and maintain high standards of ethics, integrity, stability, and professionalism in title insurance practice throughout the Commonwealth of Virginia.
Real Estate Mailbag
by Robert J. Bruss
Whither Title Insurance?
Q. When we bought our new home recently we were told by the real estate agent the law requires us to buy title insurance. It cost us $1,276. But I have no idea if we received any benefit. Were we ripped off?
A. That realty agent who told you title insurance is required by law is mistaken. However, virtually every mortgage lender insists on a lender's title insurance policy, so you would not have obtained a mortgage without buying a title insurance policy. But, with a little shrewd negotiation, you might have gotten the seller to pay the title insurance premium.
The title insurance does a terrible job of explaining the benefits for homebuyers of obtaining both a lender's title policy for the lender and an owners title policy for the homeowner. For a one-time premium, your owner's title insurance policy protects you against title risks, such as forged signatures, undisclosed liens and encumbrances, missing heirs who reappear to claim your property, unpaid tax or other liens, and defective deeds. Many other title risks are also insured.
As for your question about getting ripped off, nobody can say for sure if title insurance is overpriced. Only about 7 percent of title insurance premiums are used to pay claims. However, the balance goes for title searches plus profits. I would never acquire a property without title insurance and you shouldn't either.