Why do you need it?
Buying a new home is one of life's most gratifying experiences. As you approach the big day of closing, however, all the details can be a little overwhelming. You might easily overlook the single most important step in the entire process - - the purchase of Title Insurance on the wonderful new home of yours.
What is a Land Title?
A Land Title is the evidence, or right, which a person has to the ownership of land. You should always look the title over carefully before buying, checking for certain defects that make the land unmarketable. Perhaps someone other than the current owner holds a legal right to the land. That person could claim rights to the property itself, or even make demands as to how you use the land in the future.
When your title is examined, the title examiner may fail to uncover such items as unpaid taxes, easements, restrictions and more. All items affecting the title are not contained in a single book, in a single office or even in the same city. There is also the possibility of human error in numerous situations. These are just a few of the reasons a property owner needs the protection afforded by a title insurance policy.
Do I need Title Insurance?
Title Insurance is an indemnity against such unknown defects - including objections to your title - that exist as of the date of your policy. A title insurance policy does not guarantee that your title is perfect. However, it is a contract of insurance through which you can protect yourself from serious financial loss if a problem should arise which challenges your title.
But the lender already requires Title Insurance. Won't that protect me?
Not necessarily. There are two types of Title Insurance. Your lender will likely request that you purchase a loan policy to safeguard the lender's security interest in the real estate being purchased. This policy is sometimes called a "Mortgagee Policy", and is issued in the amount of the mortgage loan. There is a one-time premium payment for this policy. The amount of coverage decreases as your loan amount decreases with each mortgage payment.
An Owner's Policy covers the home buyer's equity in the home. Because a policy safeguarding the lender's security interest may not insure the buyer's right to the use and enjoyment of the property, it is wise for you, the homebuyer, to protect yourself with an Owner's Policy. This policy should be purchased for the full value of your property. Under its terms, the Owner's Policy will provide a defense for any legal action brought against all matters covered by your policy, at no cost to you. There is a one-time premium which will protect your equity for as long as you own the property. And if you sell the property, this policy will protect you on your warranty.