What is real estate title insurance?
Title insurance protects against title search errors, undiscovered title defects, and losses that arise from disputes over ownership once the property has been purchased.
What is a title search?
A title search is intended to provide a buyer with basic information about the real estate he or she wants to purchase. Among other things, the title search will ensure that no one other than the seller has any ownership interest in the property.
What is a title defect?
A title defect is any legal right to property that is claimed by a person or entity other than the owner.
Why do I need title insurance?
If you use a mortgage loan to finance the purchase of a home or any other piece of property, your mortgage lender will require you to purchase a title insurance policy that insures them against title defects. This policy, called a lender’s policy or a loan policy, protects only the mortgage lender’s interest in the property during the life of the loan. To protect your own interests in the property against loss due to unknown title defects, you will need to additionally purchase an owner’s policy.
Is Title Insurance Mandatory?
You are not legally required to purchase both a lender’s policy and an owner’s policy. However, there are several reasons why purchasing an owner’s policy makes good sense. First, compared to the protection it offers, the cost of an owner’s policy is minimal. An owner’s policy can spare you the time and expense of defending your property rights against claims brought by others and will reimburse you for losses caused by title defects up to the face amount of the policy. Second, even the most thorough title search cannot absolutely assure that no title defects exist. An owner’s policy will protect and defend you against undiscovered title defects such as:
- Forged documents
- Liens on the property for unpaid taxes
- Negligence on the part of the original title examiner
- Undisclosed or missing heirs who come forward to claim part or all of the property
- Other unknown claims to the property that are not contained in any public record
- Those created, assumed, or agreed to by the insured
- Those unknown to the title insurer, not recorded in any public records, but are known to the insured and not disclosed to the title insurer.
The cost of an owner’s policy is also negligible because the majority of the fee you will pay is for the balance due on your mortgage. Your owner’s policy will cover the cost of any legal dispute with a neighbor if for example, litigation arises over your boundary lines sometime in the future. In addition, an expanded owner’s policy guarantees that the title insurer will provide you with an attorney for that boundary dispute. Like all insurance you may never need it, but we strongly recommend it because the cost is so low and the potential benefit so high.
How much will I have to spend on title insurance?
How much you spend on title insurance will depend on the type of policy you purchase. The cost of a lender’s policy is typically based on the amount of the buyer’s mortgage loan. On average, lender’s policies cost between $800 and $1,000 – a one-time fee paid at closing. The cost of an owner’s policy is typically based on the sales price of the property. On average, owner’s policies cost between $450 and $600 – a one-time fee paid at closing.
As licensed title insurance agents, we can answer additional questions or concerns you may have about a former owner or a boundary line issue. Schedule your own free, no-obligation consultation in our Hartford office by calling toll free at 888-336-1212 between 9:00 and 5:30 Monday through Friday, or by clicking here to use our interactive calendar scheduler.