Title Insurance and Why It’s Important To You
A home is one of the largest purchases that most people will ever make. Did you know that when you purchase your home or land, you are actually purchasing the title to the property – not the actual property? When you close on your home or land, you are really purchasing the right to occupy and use the space, with limits on certain rights and claims asserted by others that limit your use and enjoyment of the property – and sometimes can bring financial loss. Title insurance is different from homeowner’s or hazard insurance that covers your property against fire, theft and windstorm loss. When you make a one-time purchase of title insurance, your property becomes insured against pre-existing problems or hidden defects in the history of your property’s title.
What kinds of problems might impact the transfer of title? Prior to issuing title insurance for your purchase, the chain or history of your property’s title is thoroughly examined for “material objections” that might impede the transfer of title. These “clouds” may be improper wording or incorrect names on deeds, wills, and trusts. Outstanding mortgages and judgments or a tax lien, certain types of easements, pending litigation against the property, and incorrect notarization of documents all are potential defects in the title that must be cleared before title can be transferred to the new owner.
Sometimes, even after a detailed title examination, latent problems can surface after closing. These might include a forged signature on a deed, an unknown heir that appears and claims ownership, a forged or expired power of attorney or mistakes in the public record – all of which can cause financial problems for the new owner. When title insurance has been purchased, the title insurer then steps in to defend against an “attack” on the title, and will help either to perfect the title or pay valid claims.
Title insurance can be obtained through a title company or a law firm with the cost included on your closing statement. Title insurance is definitely a wise purchase decision – and should be part of your due diligence.
