Title Insurance

Title insurance is mandatory for people financing their homes through a mortgage loan. This is because (all) mortgage lenders require title insurance equal to value of the mortgage loan as a precondition for extending a mortgage loan. Title insurance lasts until the mortgage loan in question is paid back in full. Like mortgage insurance, title insurance also protects the mortgage lender at the expense of the borrower. However premiums on title insurance are not spread over the life of the mortgage loan but have to paid in lump sum at the time of signing the mortgage loan contract. It is important to note here that title insurance does not protect the borrower’s equity in the insured home. To protect their equity borrowers need to purchase owner’s title insurance for the face value of the home. Most mortgage lenders pay the owner’s title insurance premiums as part of their obligation to deliver a good title to the borrower. This is because additional cost of purchasing owner’s title insurance (along with title insurance) is negligible. However they are a number of mortgage lenders that require borrowers to pay premiums on owner’s title insurance policy for the property question.

Title insurance protects mortgage lenders against losses caused by events that occurred prior to the date on which the title insurance policy was issued. Protective cover ends on issue date of the title insurance policy and extends backward for an indefinite period. Thus title insurance differs from conventional insurance policies in that it protects you against losses caused by events that have occurred in the past in contrast to conventional insurance policies that provide protection against losses from (potential) future events. Premiums on a large number of title insurance policies remain uniform despite increases in value of the insured property. Title insurance policies continue to protect mortgage lenders throughout the term of the mortgage loan. You are required to buy a new title insurance policy on refinancing your mortgage loan. However you would not be required to buy a new owner’s title insurance policy. Three of the most popular types of insurance policies include basic owner’s title insurance policy, extended owner’s title insurance policy and basic lender’s title insurance policy.

A vast majority of people questions the practicability of buying title insurance. Citing the problems addressed by title insurance can satisfy their concerns to some extent.

Some of these defects are easements, incorrect notary acknowledgements, property line disagreements, confusions because of similar or same names, outstanding mortgage judgments and tax liens, forged deeds transfer of property by a mentally challenged person or minor, previously undisclosed or missing heirs with claims against the property and deeds and wills that contain incorrect names and improper vesting, liens by contractors, liens for unpaid taxes, forgery and errors or omissions in deeds etc. Before agreeing to issue a title insurance policy, title insurance companies conduct a title search. Title search refers to checking for defects by examining public records of the insured property. These records include a number of documents including deeds, mortgage loan contracts, wills, divorce decrees, court judgments, tax records, liens, encumbrances, and maps etc. Title search determines various details regarding the property to be insured such as owner of the property, outstanding debt and current condition of the title. Title insurance companies may handle property closings keeping earnest money in a trust account called escrow account until completion of the transaction.

Title insurance companies might present special concessions for first-time buyers, senior citizens and certain professionals. As with conventional insurance policies, shop around to compare both premiums and terms and conditions of title insurance to find the most affordable policy suited to your needs.