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A Complete Guide to Title Insurance

Imagine a situation where you find out that the title of the property that you recently invested in is under dispute! To avoid such a stressful situation, you need title insurance.

Title insurance is an insurance product that you should consider before investing in any land, home, or for that matter any real estate property. It protects you against the financial loss that you might incur by way of claims in future which may arise if the title of the property is found to be defected and it turns out that the party from whom you purchased the property didn’t hold ownership of the said property.

Here is a glimpse of the aspects of title insurance that are covered in the article.

  1. What is Meant by Title Insurance?
  2. Need for Title Insurance
  3. Types of Title Insurance
  4. What is the Price of Title Insurance?
  5. How Does Title Insurance Work?
  6. Title Insurance for Property Purchased in Cash

Let’s start the discussion!

What is Meant by Title Insurance?

When you buy a property you acquire the title i.e. legal ownership of the property. However, it may happen that the person from whom you bought the property didn’t hold a legal title. It is a well-established principle that a person can’t pass on a better title than he possesses himself. This means that if the previous owners of the property don’t have a legal title to the property then even you will not get a clear title.

If you are an owner of any real estate property then title insurance can protect you against the financial loss that you may incur due to a possible defect in the title of the property. If any dispute arises in the future regarding the legal ownership of the property, the insurer pays for any legal fees that will be incurred to resolve the dispute. Title insurance provides indemnity for all those defects that existed before the property was purchased but were discovered during or after the property was purchased.

After you have purchased a property the next issue that will need your attention is property management. Managing property can be really troublesome at times especially when you do not have prior experience in property management. If you are looking for professionals who can manage your property on your behalf, you can choose All Property Management as they can help you with financial, marketing as well as maintenance of your property.

Need for Title Insurance

You will never regret buying title insurance as it is a minor investment that can save you from major litigation costs that can occur after you purchase a property if it turns out that there are some issues with the title of the property. Title insurance not only protects you from defects in the title of the property but also provides you protection against claims arising on account of unpaid property taxes, liens in case of mortgage loans, or any encumbrances.

Consider a case where you do not have any title insurance for your property and receive a notice to pay the pending dues of the property tax that is not paid by the previous owner. In this case, you will have to bear the burden of unpaid property taxes. Having title insurance will save you from such an additional burden arising on account of a defect in the title of the property and other related factors such as unpaid taxes that can impact your title to the property either currently or in the future.

Types of Title Insurance

There are two types of title insurance that are offered by the insurance companies namely lender’s title insurance and owner’s title insurance.

If you buy a property through a mortgage then normally the lender will require you to purchase a lender’s title insurance so that their interest in the property is protected. Thus, a lender is protected against any loss that may arise in the future if the title of the mortgaged property turns out to be defective. The protection that the lender gains continues until you have repaid the amount of loan.

An owner’s policy is the one that provides protection to the purchaser of the property in the event of any defect in the title of the property. The charges for this can either be paid by you or the seller of the property. When you have a cover of the owner’s policy you remain protected as long as you own the property.

What is the Price of Title Insurance?

Buying title insurance will require you to spend on title insurance fees. This fee is a one-time charge that you will have to pay before or at the time of purchase of the property.

The amount of insurance may depend on a number of factors such as property price, amount of loan, title search, examination and costs expected to be incurred in the event of title defect and the state in which the property is located.

Property laws may be different for different states and thus regulations regarding property title insurance can be different for different states. If you want to access the property laws of different states, you can find the same at All Property Management.

How Does Title Insurance Work?

Once you have purchased the title insurance and paid the requisite fees the insurance company carried out a title search for the property that you are purchasing. This involves scanning through the public records for establishing the ownership of the property and determining whether there are any claims against the property. Once the search is completed, the insurance company appoints an underwriter to understand whether the title can be insured or not. After the insurance has been approved, the insurer undertakes to provide you protection against the problems that may arise in the future regarding the title of the property.

Title insurance provides you protection from the following types of claims:

  • Forgery with respect to property documents,
  • Dispute regarding ownership,
  • Unpaid taxes,
  • Liens and encumbrances,
  • Unknown heirs to the estate, etc.

If any dispute arises in the future then the insurer will provide you protection for the legal expenses that will be incurred in resolving the disputes.

Title Insurance For Property Purchased in Cash

Even if you are planning to purchase a property by paying the seller in cash then also you should refrain from buying title insurance. Buying in cash doesn’t mean that the property is free from title effects. Thus, irrespective of the mode of payment, title insurance is a must.