Why Purchase An Owner's Title Insurance Policy?
Lender's Coverage is Not Enough
Lender's title insurance, generally purchased in any transaction involving a lender, does not protect you, the buyer. It simply protects the lender. It is for this reason that many homeowners choose to purchase an Owner's Policy of Title Insurance. This protects you from several issues up until the time at which you sell your property.
What is Owner's Title Insurance?
Owner's title insurance usually guarantees that the Insurer will pay any legal fees for defending against challenges to title and will pay any valid claims. Even though a title company has performed a title examination and assumed liability for the work, an Owner's Policy of Title Insurance would be a good idea. A title agent's errors and omissions covers the Insured for any negligence committed by an examiner.
How Does Owner's Title Insurance Protect Me?
Owner's title insurance is usually issued in the amount of the real estate purchase. It is purchased for a one-time fee and lasts as long as you or your heirs have an interest in the property. This may even be after the Insured has sold the property. Only Owner's title insurance fully protects the buyer should a problem arise with the title that was not uncovered during the title search. Owner's title insurance also pays for any legal fees involved in defending a claim to your title.
Why Title Issues May Arise
During a title exam, title agents complete a search of the public records for items that may affect the title to your property. These searches usually go back about 42 years (ours go back 50 years) and may uncover defects in the title such as improper information made in wills, deeds, trusts, outstanding judgements or tax liens against the property, and easements of record.
Occasionally, in spite of an exhaustive title search, hidden hazards can emerge after closing. In fact, statistics show that a title issue can arise in as many as 1 in 4 transactions. Things such as mistakes in the public record, previously undisclosed heirs claiming to own the property, or forged deeds could create a cloud on title. Owner's title insurance offers financial protection against these issues by insuring that the Insurer will negotiate with third parties to resolve the issue, or pay damages and legal fees involved in defending your title to the property.
A title insurance policy is a contract between the owner of a parcel of land and the title company, which guarantees the owner a particular set of facts concerning the land described. The primary facts insured are described below:
That the homeowner is in fact the owner of the land described and his title is good against every other claim except as stated in the policy.
That the title to the land insured is clear of all encumbrances to the title, such as mortgages or liens, servitudes, easements, restrictions, oil and gas leases, outstanding mineral interests or leases for other uses of the land, including pasture leases, crop leases of other tenancies of third parties, except as stated in the policy.
That all property taxes (including state ad valorem, city and school taxes) have been paid against the subject property, except for the year in which the property is purchased and subsequent years.