Purchasing a home is the largest and most important investment you will make. When you buy real estate, you get more than just a building; you receive title to a piece of land that has been owned by others before you. Naturally, you will want to be assured that your real estate title is without defect, and you want to be protected if it is not. Title insurance is issued for this purpose.
The Deed that the seller provides to transfer the title to you will be filed at the county Recorder’s Office and becomes one of the many documents found in the property’s entire historical record. Before issuing Title Insurance, an insurer must first search or examine this historical record to determine insurability of the title. One type of risk associated with Title Insurance is “human error,” such as a records error or mistake made during the title search. The other type of risk is called a “hidden defect” or a happening that cannot be determined by examining the records. Examples of these are the presence of a forged recorded mortgage or the missing heir of a past owner coming forward to claim ownership. In both cases, a challenge to the title could render a severe loss.
Most lending institutions require title insurance, insuring that the lender has a valid first mortgage on the property. However, the insurance policy called a “Loan Policy of Title Insurance,” protects only the lender and not the purchaser. The purchaser must obtain an “Owner’s Policy of Title Insurance” to be protected. When an “Owner’s policy” is issued in connection with the lender’s loan policy, it is called “simultaneous issue,” which reduces the loan policy premium.
The “owner’s Policy of Title Insurance” protects the purchaser from its effective date back to the origin of the title. For a one-time premium, paid at the time of closing, a buyer is covered for as long as he/she or his/her heirs have an interest in the property. The title insurer, without expense to you, will defend you against any attack on the title to your property as insured. Before buying real estate, request an “Owner’s Policy of Title Insurance.” The one-time premium is small, but the protection is great.
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