A lot of homebuyers do not understand the importance of purchasing an owner's title insurance policy when buying their new home.
Only owner's title insurance fully protects the buyer should a problem arise with the title that was not discovered during the title search. Owner's title insurance also pays for any legal fees involved in defending a claim to a title.
Further reading: Real life title claims as witnessed by Federal Title attorneys
Like any insurance policy, it is a small price to pay to insure one of the most important investments your homebuyer will ever make.
Q. Why should I purchase an owner's title insurance policy?
A. When you buy a home, you want to be certain that the title to the land is clear. However, even the most diligent search of the public records could fail to disclose a number of title defects. So a title insurance policy protects you for the duration of your home ownership.
Legally you do not need to purchase an owner's policy, though it is strongly recommended. Find out how much an owner's policy will cost with a quick quote.
Q. What problems could arise through a title search?
A. Several scenarios could create a title cloud, including but not limited to:
- A forged will or deed;
- A title transfer by someone underage;
- A married person conveying real estate without his or her spouse;
- Fraudulent impersonations;
- Secret marriages;
- Undisclosed heirs;
- Invalid divorces; and
- False affidavits.
READ MORE: More title insurance claims
Q. Why do I also have to purchase a lender's title policy?
A. Lenders must also protect themselves against title related defects. A lender wants to insure that the loan they are issuing is protected by title insurance, since they too must insure that their investment is covered. And in some cases, when a lender sells loans to secondary investors, the new lender requires that the loan has title insurance.
Q. Why can't I use the seller's owner's title policy?
A. The seller may have a judgment against them or another issue that could cause a discrepancy in the title. Plus, the policy needs to be in the new purchase amount of the house, so it is properly insured. However, if the new homebuyer can secure a copy of the seller's current Owner's Title Policy and the policy is less than 10 years old, the homebuyer may be entitled to a reissue rate for their new Owner's Title Policy.
Q. When does an owner's title insurance policy expire?
A. An owner's title insurance policy stays active as long as you (or your heirs) own the said property.
Q. About how many claims are made with title insurers?
A. According to American Land Title Association (ALTA), title insurers paid approximately $460 million in claims in 2001. This figure was up over $100 million from $350 million in 2000. Compensation was paid to insured homeowners either for losses they experienced under policies issued to them or to defend their titles from the claims of others.
Generally speaking, homeowners assume there are rarely problems with titles, however according to an ALTA survey of 420 abstractors and agent operations, title problems arise in one out of every four real estate transactions. In 2001 this would mean that 1.6 million of the 6.5 million residential real estate transactions had a problem with the title.
Q. What kind of title policies do you offer?
A. Federal Title offer two kinds of owner's title insurance policies, a standard package and an enhanced package. The homebuyer can decide which package meets their needs, up until they are signing the papers at the closing table. Click here for a comparison between the two title policies we offer. Order settlement services online today, or if you are shopping around, get a free quote online.
READ MORE: Compare title insurance policies