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Why I Need To Buy Owner’s Title Insurance
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When purchasing a home, buyers are usually faced with the opportunity to purchase an owner’s title insurance policy. If obtaining financing from a major lender, the lender usually will require the buyer to pay for a lender’s title insurance policy and the buyer has the option of purchasing an owner’s policy. While both policies insure the title to the property there are differences between the two policies. This article will discuss these differences and show why it is important to purchase the optional owner’s title insurance policy.
Title insurance protects the named parties’ interest in the property against loss that arises due to defects or imperfection in title. These imperfections can be, but not limited to, liens, encumbrances, forged documents, improperly recorded documents, gaps in ownership, probate maters and any other items indentified in the policy. Each title insurance policy is unique and contains individual terms based on the history of the property.
Owner’s Title Insurance
Since your home is often the biggest investment one will make. Making sure you and your home are protected makes sense. The owner’s title insurance policy is a one-time charge and provides coverage for as long as you have an interest in the home. If a claim or challenge to the title of your property is made, the title insurance company will incur the costs involved to protect your right to the property. This could mean legal fees defending against the challenge, paying to correct a wrong or paying to settle a valid claim. Even the best Attorney’s, title examiners and closing agents cannot protect the equity in your home from all of the previously mentioned items.
Lender’s Title Insurance
Whereas the owner’s title insurance policy protects the owner’s interest in the property, lender’s title insurance policy protects the lender’s interest in the same property. As previously mentioned the lender usually requires a lender’s title insurance policy be in place anytime they are issuing financing on a property. While this will protect the lender’s interest should a claim or challenge to the property arises and the lender’s lien position is deemed invalid. This lender’s policy will not provide protection for the owner of the property.
Who pays for which policy?
Owner’s and lender’s title insurance is unlike other insurance policies in that it is a onetime charge for as long as you own the property or the lender’s mortgage is active. The cost of an owner’s and lender’s title insurance policy depends on the purchase price, loan amount and state where your property is located. Typically the buyer or seller of the property is responsible for the cost of the policy and we recommend checking with a professional in your area.
Protecting Your Home Investment
When you purchase a home, you will normally purchase several kinds of insurance policies to protect your home and property. A homeowner's insurance protects you from losses due to fire, theft or wind damage, and flood insurance protects losses due to natural calamities due to water.
But title insurance is unique. While an owner's insurance protects your home against loss by damages, title insurance protects your property against hidden title hazards. Usually, the importance of a title investment is not understood as well as other types of insurances. But the fact is that, it is as important as any insurance.
When you purchase a home, you actually purchase the title to the property. But in some cases, that title may be limited by others’ claims. Title insurance protects you from such title hazards.
Other types of insurances (eg. home owner's insurance) that protect your home focus on possible future events and you have to pay premium yearly. Unlike them, you have to pay one-time premium for title insurance. With your home being the largest and most valuable investment one can make, the cost of title insurance clearly outweighs the risk.
Ted Silva, founder of QuickSilva Title, LLC, started the company with just a dream and a passion for the real estate industry. Our real estate attorney helps you fix issues in real estate closing, escrow services, title and loan closing. If you are looking for solutions to issues in any of these services, visit our Ted Silva Law offices.
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