What is Title Insurance?
There are two basic types of title insurance policies: Owner's Policies and Lender's Policies. An Owner's Policy insures the purchaser or owner against a loss that may arise by reason of a defect in their title or ownership of real property. A Lender's Policy insures the lender that it has a priority lien on the property. In addition, the title insurance company agrees to defend the owner or lender (as the case may be) in court if there is an attack on the title. It will cover attorney and court expenses or pay a loss caused by the defect in title up to the face amount of the policy subject to the terms listed in the policy.
What are the Risks That Title Insurance Protects Against?
There are numerous defects or problems that can arise to cause an attack or loss of the title to real property. Some of these include problems not disclosed by the most careful search of the public records (the title search). Hidden risks can cause a total loss of investment or heavy legal expenses in the defense of an attack on the title. Some title problems may show up months or years after the original purchase of the property. The following are examples of matters that can cause loss of title or an expensive lawsuit:
- Intervening liens or encumbrances which arise between the date of execution and delivery of the deed or mortgage but prior to the recordation of such instrument(s)
- Forged deeds, mortgages, satisfactions or releases of mortgages and other instruments
- Failure of spouses to join in conveyances
- Undisclosed or missing heirs
- Deeds from minors, aliens or persons of unsound mind
- Errors in indexing of public records
- Liens for unpaid taxes including estate, inheritance, income or gift taxes
- Erroneous reports furnished by tax officials
- Mistakes in recording legal documents
- Deeds from defunct corporations
- Unprobated wills
Do Title Insurance Premiums Vary From Company to Company?
The answer depends on which state the property is located in. In states such as New York, title insurance premiums are filed and regulated by the state and are therefore identical from company to company. It is important to be aware, however, that other charges, such as search fees, are not regulated and are left to the discretion of the particular company. Therefore, when deciding upon a title company or agency, it is a good idea to get a quote in advance which includes all of their charges.
In other states, such as California, title insurers have certain discretion on all of their charges, including title insurance premiums.
Is There a Cost Advantage to Using the Same Title Company or Agency That Issued Your Previous Policy?
Generally speaking, no. In states such as New York, title insurance premiums and applicable discounts (e.g. on a mortgage refinance) are filed and regulated by the state. While many companies, such as TitleVest, always automatically extend to all of their clients whatever discounted premiums are applicable to the particular transaction, some companies only offer the applicable discounts if the purchaser or borrower (or their attorney) specifically asks for such discounted title premium and provides proof of their entitlement.
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