When real estate closings are approaching, buyers find themselves asking ‘why do I need title insurance?!’ It is a common question that all parties to a real estate transaction should verse themselves in the topic to some degree.
First, try not to think of title insurance as you would other forms of insurance. The premium you pay for title insurance is for prevention of any risk rather than assuming risks. In other words, the title insurer is not having you pay $XXX because of the risk associated with your property, but rather to protect your ownership interest from claims of 3rd parties.
For example, if you purchase a home and have a Owner’s Policy of Title Insurance then you will be protected from 3rd parties challenging your ownership by way of a lien, errors or omissions in the deed, mistakes in examining title records, forgery, or even undisclosed heirs. Normally, these issues are uncovered during a title search in the public records. However, when defects are not uncovered during this process, your title insurance will protect your interest in the property.
Often times, lenders will also require their own title insurance policy. This is known as a Lender’s Policy of Title Insurance and is separate and distinct from the Owner’s Policy of Title Insurance. The Lender’s Policy will protect the Lender’s interest in the property should their lien rights be challenged by 3rd parties.
Both Owner’s and Lender’s Policies coverage are provided for a one-time fee based upon the value of the coverage provided (the value of the property). This fee is incurred at the time of closing. Following the closing, you will have your policy and should be kept in your possession.
If you desire to have your home refinanced, you will likely be required to obtain a new policy for your Lender as certain problems with title may arise during your ownership. For example, you may have remodeled your house and had a dispute with the contractor who placed a lien on the property or you may have unpaid taxes which resulted in a judgment against your property. For these reasons, your Lender will likely require a new policy at the time you refinance. However, we may be able to save you some fees due to your original Lender’s Policy. Please contact Legacy Law, P.A. for any future transaction to ensure that you will receive the appropriate credit and so you are only paying the fees required.
*Note: No legal advice or suggestions are being given. Please contact us should you require any legal advice, thank you.