The importance of title insurance

There are two types of title insurance, lender coverage and homeowner’s coverage. Lender coverage protects the lender in the event that their interest in the property is compromised by an unpaid lien or lien or by a challenge to the owner’s title. Lender coverage is required on most home loans.

Owner’s title insurance is optional. Homeowner’s coverage is the cheapest insurance a buyer will buy. Protects the buyer’s interest in the property for as long as they own it. If someone disputes the buyer’s title or if there is any bond that should have been canceled prior to closing, the title insurance company will defend the buyer’s title at no cost to the buyer.

Sometimes when closing, buyers will be tempted to opt out of buying the owner’s portion of the title to save a few hundred dollars. Many times, the loan officer or real estate agent will even encourage the buyer to give up on buying this vital one-time payment insurance.

We’ve all heard the saying “penny wise and pound dumb”. It means that some people will do anything to save a few dollars today only to end up paying a lot more in the future. Any buyer who chooses not to buy homeowner’s coverage is being very wise and foolish. Homeowner’s coverage, unlike most other insurances, carries a one-time premium. The amount of the premium is based on the value of the property and may vary slightly between title companies. As mentioned above, the coverage is valid for as long as the buyer owns the property.

Most title insurance companies have a simulcast option. If a buyer chooses to purchase the insurance on closing day, they will receive a discount on the lender’s policy. Therefore, buyers should be sure to ask the closing company or attorney what the simulcast rate is for the title insurance company through which they write their policies. Note that if a buyer chooses not to purchase homeowner’s coverage, they will have to pay the full premium for the lender’s policy.

Title insurance companies also offer reissue fees for refinances. Reissue rates allow the borrower to pay for coverage on the difference between the original lender’s policy value and the current amount of their loan.

Depending on the internal procedures of the title company or closing attorney, a buyer will receive the policy from its owner at the closing table or by US mail a few weeks after closing. The owner’s policy should be kept in a safe place along with the property deed, as it is the only original. In most states, attorneys and title companies are only required to keep records for seven to ten years. Therefore, if a problem arises years later, the attorney or title company may not have a copy of the title insurance policy because they may have already deleted the closing file.

If it is necessary to file a claim, the title insurance company contains the information necessary to begin that process. Be prepared to provide the title company with a detailed explanation of the claim and any supporting documentation.

Copyright © 2008 Bishop Realty Services All rights reserved.