The Basics of Title Insurance
When I meet with borrowers, I am often asked questions about title insurance. Many borrowers don’t understand what title insurance does and why it is required.
Unlike home insurance and car insurance which focus on hazards that haven’t happened yet, title insurance is protection against loss from hazards and defects that happened in the past.
The title insurance company will search land records going back many years. They research transactions in which the property has been transferred from one owner to another. This history is considered to be the chain-of-title. Title companies will search for any defects or weaknesses in the chain of title. These weaknesses may include:
*Unpaid real estate taxes on the properties
*Liens against the property that may be unresolved
*Defects in recorded documents
*Issues that may arise with probated properties
Title insurance is a one-time premium paid at closing that protects you or your lender if a lawsuit is filed against the title.
A basic lender’s policy is required and protects only the lender up to the amount of the mortgage. A basic owner’s policy is optional, but is required to protect your equity in the home. The additional cost above the lender’s policy is generally relatively small. The owner’s policy protects you as long as you have a vested interest in the property.
Title insurance premiums vary by state as well as the customs regarding who pays for the title insurance between the buyer and the seller. If you are refinancing your home, you may qualify for a discounted rate or a reissue rate of your existing policy.
Your mortgage consultant will work hand-in-hand with the title insurance company in preparing for your closing. They will be able to assist you with questions regarding additional and expanded coverage options. They can address what deficiencies would be covered with extended coverage beyond the required lender’s policy.
I would be happy to address any other questions or comments you may have. Leave a comment with your questions on this post, or you can connect with me directly at Guaranty Trust Company’s Knoxville office 865-824-2778 or via e-mail aimee.macilveen@guarantytrust.com
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