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