What Is Title Insurance?
Title insurance is designed to protect buyers and lenders from potential financial losses arising from defects in the title of a property providing coverage for any “hidden hazard” or legal issue related to ownership rights that might arise after the purchase of the property.
Title insurance is typically purchased during your real estate transaction and there are two main types of title insurance policies:
- Owner’s title insurance Protects the homebuyer from title issues that may arise after purchasing the property.
- Lender’s title insurance Is typically required by lenders during the homebuying process and protects the lender’s investment in the property, ensuring that their loan is secure against title problems.
**Unlike other types of insurance, which require ongoing payments, title insurance is typically a one-time premium paid at closing.**
Why do I Need Title Insurance?
Title insurance is important because it provides long term protection for homebuyers and lenders from financial losses due to issues with the property title that may not be discovered during the closing process. These issues can include unknown liens and unpaid property taxes, past ownership disputes, errors in public records, missing heirs or fraudulent claims to the property.
Since North Carolina operates under a “title search” system, which helps to uncover these hidden issues, title insurance offers additional peace of mind by covering the costs of resolving potential title defects that may arise after the purchase, ensuring your property ownership remains secure for years to come.
What is the Difference Between Standard Owner's Policy and Enhanced Homeowners' Policy?
- Standard owner’s policy An owner’s policy protects you from defects and liens in the history of your title through the date and time your deed is recorded in the public records.
- Enhanced homeowner’s policy An enhanced homeowner’s policy takes your protection to a higher level by providing coverage for many additional risks, including some that might occur after the deed has been recorded. The enhanced homeowner’s policy protects against many common, frustrating problems, and the policy protects your investment for as long as you or your heirs own the property. Higher rates and deductibles may apply.
*More coverage, more peace of mind*
A title search can show a number of title defects and liens, as well as other encumbrances and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgments against the seller and restrictions limiting the use of the land.
Yes. There are some “hidden” hazards that even the most diligent title search may never reveal. For instance, the previous owner could have incorrectly stated his marital status, resulting in a possible claim by his legal spouse. Other “hidden hazards include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names and clerical errors in the records. These defects can arise after you’ve purchased your home and can jeopardize your right to ownership.
Not necessarily. A deed is just a document by which the right of ownership in land is transferred, whatever that right may be. It’s not proof of ownership, and it doesn’t do away with rights others may have in the property. In addition, a deed won’t show you liens or claims that may be outstanding against the title.
Because the owner could, in very short time, do many things to encumber the title. For example, he could grant easements or construct improvements that encroach on adjacent property. He could get married or divorced, or have a lien filed against the property. It is necessary to conduct an up-to-date title search to uncover any such problems.
That depends on the claim. In an extreme case, you could lose your entire home and property – and still be liable to pay off the balance of your mortgage. Most claims aren’t that dramatic, but even the smallest claim can cost you time, money and aggravation, not to mention the cost for a legal defense.
If a claim is made against your property, title insurance will, in accordance with the terms of your policy, assure you of a legal defense – and pay all court costs and related fees. Also, if the claim proves valid, you will be reimbursed for your actual loss up to the face amount of the policy.
Because the owner could, in very short time, do many things to encumber the title. For example, he could grant easements or construct improvements that encroach on adjacent property. He could get married or divorced, or have a lien filed against the property. It is necessary to conduct an up-to-date title search to uncover any such problems.
An attorney’s opinion is based on a search of the public records. So, once again, even the most exhaustive search of these records may not reveal everything. Unlike a title insurance company, an attorney is not liable if you should suffer loss because of “hidden” hazards in the title.
Probably a lot less than you think. Charges vary in different sections of the country, but generally the cost of title insurance amounts to about one percent, or less, of the cost of the property. And unlike other insurance premiums, which must be paid annually, a title insurance premium is paid one time only, usually at settlement.
For as long as you or your heirs retain an interest in the property and, in some cases even beyond. A small cost for years of protection – the real estate you own represents stability, permanence and the hope of the future. Don’t take a chance and let your property be taken from you because of a flaw in the title. It makes good sense, for the relatively small amount it costs, to protect yourself with title insurance.