|
You purchase homeowners insurance to protect yourself financially
in case something happens to your property or its contents. However
homeowners insurance won't protect your financial interests if a matter
arises regarding past ownership of your property. That is where title
insurance comes in.
Only the title to the land and not the land itself can be purchased.
So, unless a homeowner possesses a clear title, he or she risks losing
his/her home and the land under it. Title insurance guarantees the
title as reported.
Actually there are two types of title insurance: lender
policy and the owner's title insurance. Most lenders require a loan
policy when
they issue you a loan to protect their interest (the amount they loaned
you) should a problem arise. The policy amount decreases each year
and eventually disappears once the loan is paid off. Therefore the
owner should also have title insurance to protect his/her financial
interest. Only owner's title insurance fully protects the buyer. Should
hidden defects surface at any time challenging an owner’s rights, the
title company will defend the title, in court, if necessary, and cover
the owner’s losses up to the full value of the policy.
But before title insurance is issued, the title company (or attorney,
depending on the local practices and laws) performs a title search.
A title search involves searching public land records to ascertain
if the seller has the legal right to sell the property. The title company
will:
-
conduct a chain of title, which is a review of the owner history
of the property, checking for who purchased the property, who sold
it, and when;
-
perform a tax search to verify the present status of taxes;
-
conduct a judgment search to determine whether there are any
general liens against the property;
-
and, sometimes even, conduct on-site inspections to verify lot
size, the location of improvements, and evidence of unrecorded
easements.
According to the American Land Title Association, 25
percent of title searches find a title problem that is fixed before
the insurance is
issued. At this point, you may be wondering why you even need insurance
following an exhaustive title search. Unfortunately, it’s nearly impossible
to guarantee a title is clear of hidden defects—those circumstances
that could find you in a tug of war over the property. Examples of
hidden defects include mistakes in interpretation of wills and other
legal documents, liens for unpaid estate or inheritance taxes, deeds
by persons of unsound mind, impersonation of the real owner, forgery,
missing or undisclosed heirs, falsification of records, and confusion
stemming from similar names.
Your home is probably one of your largest investments. For a one-time
premium, you can have peace of mind for as long as you or your heirs
retain the property. Talk with your real estate professional for more
information on title insurance and selecting a title company.
|
is
a service mark of The Prudential Insurance Company of America. 
Equal
Housing Opportunity. Equal Opportunity Employer
