Q: What is the difference between an owner's policy and a lender's policy of title insurance?
A: An owner's policy of title insurance covers "you", as the owner, for as long as you own the property and beyond. It is a one-time fee. The best time to purchase an owner's policy is at the time of purchase of the property. The lender's policy only covers your particular lender for as long as you owe them. If you pay them off or refinance with them or a new lender, that policy is no longer valid.
Q: What does title insurance protect against?
A: Here are just a few of the most common hidden risks that can cause loss of title or create an encumbrance on a title:
- False Impersonation of the True Owner of the Property
- Forged Deeds, Releases or Wills
- Undisclosed or Missing Heirs
- Instruments Executed Under Invalid or Expired Power of Attorney
- Mistakes in Recording Legal Documents
- Misinterpretations of Wills
- Deeds by Persons of Unsound Mind
- Deeds by Minors
- Deeds by Persons Supposedly Single, but Actually Married
- Liens for Unpaid Estate, Inheritance, Income or Gift Taxes
Q: Why does the seller need to provide title insurance?
A: Any prospective buyer will need evidence that his investment in your property is free of title defects. In fact, your contract of sale probably requires it. The title insurance policy that you provide the buyer is a guarantee that you are selling a clear title to your real estate, unencumbered by any legal attachments that might limit or jeopardize ownership. It reassures your buyer that the title has passed the most careful scrutiny. In addition, it can help your deal close more quickly and easily.
Q: Why does the buyer need to purchase title insurance?
A: Without a title insurance policy, you may not be fully protected against errors in public records, hidden defects not disclosed by the public records, or mistakes in examination of the title of your new property. As a result, you may be held fully accountable for any prior liens, judgments or claims brought against your new property. However, your policy insures that if such an occasion arises, you will be defended free of charge against all covered claims. With a title insurance policy, you need never worry that your new property's history will tarnish your bright future.