What is Title Insurance?
Title insurance is a form of indemnity insurance which insures against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage loans. There are two types of policies – owner and lender. The Owners Title Policy protects the homeowners interest in the home, and the Lender’s Policy protects the lenders interest (mortgage loan).
There are few things more important than protecting your home. Owners Title Insurance has been offered for more than 100 years, because even the best title search and examination cannot protect your equity and home from matters not appearing on record.
Title insurance is the only policy that is purchased (one time fee) that protects a homeowner from everything that happened in the past vs the future. The Standard Policy covers you for defects and liens in the history of your title through the date/time your deed is recorded in the public records. The ALTA Homeowners Policy (enhanced) of Title Insurance provides coverage for many additional risks, including some which might occur after the deed is recorded.
Here are coverage comparison that will help you decide which policy is the best for you to protect your ownership of your home:
BOTH POLICIES (enhanced and standard) INCLUDE:
- Mechanic’s Lien Coverage
- Third Party Claims Against Title
- Improperly Executed Documents
- Pre-Policy forgery, fraud or duress
- Non-recorded restricted covenants
- Defective recordings of documents
- Prior recorded liens not disclosed in the policy
- Unmarketability of the title
- Policy insures the Trustee of your estate-planning trust
- Policy insures the beneficiaries of your trust upon your death
ADDITIONAL COVERAGE IN ENHANCED POLICY
- Automatic increase in coverage up to 150% (not based on inflation)
- Post Policy Forgery
- Post Policy encroachment on insured land
- Legal right to ACTUAL vehicular and pedestrian access
- Coverage for certain loss due to Building Permit violations (subject to deductible and liability limits)
- Coverage for certain losses due to existing violation of subdivision law (subject to deductible and liability limits)
- Post policy structural damage from third-party easement for mineral extraction
- Violation of restrictive covenants identified in the Policy
- Resulting in loss from correction or removal
- Resulting in loss of life
- Resulting in loss of use where single family dwelling prohibited
- Forced removal of existing structures that:
- Encroach onto an easement identified in the Policy
- Violate a building restriction line identified in the Policy
- Encroach onto neighbor’s land (subject to deductible and liability limits if boundary wall or fence)
- Land cannot be used for single family dwelling under zoning ordinance
A Few Examples of Why you Should Buy a Title Insurance Policy: (real cases)
- You receive a late notice in the mail for a loan you do not have. This notice says you have an equity line of credit but you don’t. Upon further investigation you realize someone has stolen your identity, taken out a loan in your name. That loan has been recorded against your property and now it is in default. You are about to be foreclosed by the lender. What would you do? Well if you had purchased the Stewart ALTA Homeowner’s Policy of title insurance you would file a title claim, Stewart would undertake to deal with this because of the post policy forgery coverage you have in the policy. If you did not have this type of owner’s title insurance you would have to call your own attorney to deal with this difficult situation.
- You try to refinance or sell your house and find out that your seller’s loan is still recorded against your property. Worse yet, it was a credit line and the lender who was paid at closing did not close the line of credit but, in fact, sent the seller more checks and the seller has run that line of credit up to its maximum. And even more bad news, the title company you closed with is no longer in business. What do you do? If have purchased owner’s title insurance you file a claim with the title underwriter and they will work to resolve this issue. If you do not have title insurance you will have to hire a lawyer and potentially, if it cannot be resolved any other way you could have to pay that lien off to sell your house.
- Someone knocks at your door and says she is the wife of the seller who sold you the house and she wants to know why you are in her house? You then find out that the woman who signed your deed was in fact, not the seller’s wife but his girlfriend. You have several immediate problems; fraud was committed in the sale of the property and you do not have good title to your home, also the person is probably due money from the sale which has already been given to the husband. What do you do? If you have owner’s title insurance you file an immediate claim because clearly fraud was committed and this woman has a claim against your property, your title is not good at this point. If you do not have owner’s title insurance you hire a lawyer to work through this and, at worst case you could have to pay this woman money to sign off her rights to the property.
- You purchased your property and went to the title company where the seller suggested you go, his lawyer would handle everything. So you go to closing. About 1 month later you receive a notice of condemnation from the State of Virginia that you have to evacuate your property in accordance with the condemnation agreement. Well, you didn’t know there was a condemnation agreement, the seller has already been paid by the State and you have to move immediately. You have a mortgage that will need to be paid off and you have to buy a new house. What you did not know at the time was that the seller and his attorney already knew all this and sold the house under false pretenses because the condemnation was already in process. What do you do? Well if you purchased owner’s title insurance you run as fast as you can to file a title claim and the title company will take over so you can know what to do and give you the means to do it. Without a owner’s title policy you have to hire a lawyer and figure out how to deal with this horrible situation.
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