| The buyer pays the premium at the time | | | | their attorney. This means that |
| of closing. Title insurance protects | | | | competition among title insurers is |
| against loss arising from problems | | | | largely directed toward these |
| connected to the title to your property. | | | | professionals who can direct business |
| Before you purchased the house it may | | | | rather than toward borrowers. |
| have gone through several ownership | | | | And it can pay to shop around. It's |
| changes, and the land on which it stands | | | | difficult to generalize because market |
| might have gone through many more. | | | | conditions vary state by state, and |
| There may be a weak link at any point in | | | | sometimes within states. I would |
| that chain that could pop up to cause | | | | certainly shop in states that do not |
| trouble. For example, someone along the | | | | regulate title insurance rates: Alabama, |
| way may have forged a signature in | | | | District of Columbia, Georgia, Hawaii, |
| transferring title. Or there may be | | | | Illinois, Indiana, Massachusetts, |
| unpaid real estate taxes or other liens. | | | | Oklahoma, and West Virginia. |
| Title insurance covers the insured | | | | You would be wasting your time shopping |
| party for any claims and legal fees that | | | | in Texas and New Mexico, because these |
| arise out of such problems. | | | | state set the prices for all carriers. |
| Title insurance protects against losses | | | | Florida also sets title insurance |
| arising from events that occurred prior | | | | premiums but not other title-related |
| to the date of the policy. Coverage | | | | charges, which can vary. |
| ends on the day the policy is issued and | | | | In the remaining states it may or may |
| extends backward in time for an | | | | not pay to shop. Insurance premiums are |
| indefinite period. (This is in stark | | | | the same for all carriers in "rating |
| contrast to property or life insurance, | | | | bureau states": Pennsylvania, New York, |
| which protect against losses resulting | | | | New Jersey, Ohio, and Delaware. These |
| from events that occur after the policy | | | | states authorize title insurers to file |
| is issued, for a specified period into | | | | for approval of a single rate schedule |
| the future.) | | | | for all carriers through a cooperative |
| The title insurance required protects | | | | entity. Yet in some there may be |
| the lender up to the amount of the | | | | flexibility in title-related charges. |
| mortgage, but it doesn't protect your | | | | More promising are "file and use" states |
| equity in the property. For that you | | | | - all those not mentioned above - that |
| need an owner's title policy for the | | | | permit premiums to vary between |
| full value of the home. In many areas, | | | | insurers. |
| sellers pay for owner policies as part | | | | It's a good idea to ask an informed but |
| of their obligation to deliver good | | | | disinterested person whether it pays to |
| title to the buyer. In other areas, | | | | shop in the area where the property is |
| borrowers must buy it as an add-on to | | | | located. Just keep in mind that those |
| the lender policy. I recommend doing | | | | likely to be the best informed are also |
| this because the additional cost, above | | | | likely to have an interest in directing |
| the cost of the lender policy you have | | | | your business in the direction that's to |
| to get, is relatively small. | | | | their advantage. |
| Protection under an owner's policy lasts | | | | Title insurance protects against losses |
| as long as the owner or any heirs have | | | | that might occur due to another party |
| an interest in or any obligation with | | | | claiming ownership of the property. |
| regard to the property. When they sell, | | | | Title insurance covers: |
| however, the lender will require the | | | | * Issues missed by the title examiner |
| purchaser to obtain a new policy. That | | | | * Issues missed when a deed or other |
| protects the lender against any liens or | | | | public document is determined to be |
| other claims against the property that | | | | invalid or forged |
| may have arisen since the date of the | | | | * Liens from unpaid taxes or from a |
| previous policy - in other words, | | | | former owner. |
| against something you may have done. | | | | Title insurance will pay your legal fees |
| For example, if the contractor you | | | | if you have to go to court to defend the |
| failed to pay for remodeling your | | | | deed, and if you lose the property, the |
| kitchen places a lien on your home, you | | | | title insurance will cover your loss up |
| are not protected by your title policy: | | | | to the amount of the policy. |
| the lien was placed after the date of | | | | Keep in mind that if you've owned the |
| the policy. You will probably be | | | | property for a few years and it has |
| required to get the lien removed before | | | | risen in value, the title insurance |
| you can sell the property. But in the | | | | policy you purchased at closing will |
| event the lien hasn't been removed and a | | | | only reimburse you for the original |
| search has failed to uncover it, the new | | | | amount, not for the new value of the |
| lender will be protected by a new | | | | property. |
| policy. | | | | You may be thinking, "Wait a minute… |
| You can shop around for title insurance. | | | | if I pay an attorney to perform a title |
| Unlike mortgage insurance, where the | | | | search, why do I need title insurance? |
| carrier is always selected by the | | | | Isn't it his or her job to make sure the |
| lender, borrowers can select the title | | | | title is clear?" Yes, it is… but |
| insurance carrier. Few do, however. | | | | unexpected problems can pop up - title |
| Most leave it up to one of the | | | | insurance is a cheap way to avoid the |
| professionals with whom they're dealing: | | | | cost of major problems that could pop |
| the real estate agent, the lender, or | | | | up. |