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Why Do You Need Title Insurance?
Title
Insurance.
It's a term we hear and see frequently -- we see reference to it in the
Sunday real estate section, in advertisements and in conversations with
real estate brokers. If you've purchased a home before, you're probably
familiar with the benefits and procedures of title insurance. But if this
is your first home, you may wonder, "Why do I need another insurance
policy? It's just one more bill to pay."
The answer is simple: The purchase of a home is most likely one of the
most expensive and important purchases you will ever make. You, and your
mortgage lender, want to make sure that the property is indeed yours --
lock, stock and barrel -- and that no individual or government entity has
any right, lien, claim to your property.
Title insurance companies are in business to make sure your rights and
interests to the property are clear, that transfer of title takes place
efficiently and correctly and that your interests as a homebuyer are
protected to the maximum degree.
Title insurance companies provide services to buyers, sellers, real estate
developers, builders, mortgage lenders and others who have an interest in
a real estate transfer. Title companies routinely issue two types of
policies -- "owner's," which cover you, the homebuyer; and "lender's,"
which covers the bank, savings and loan or other lending institution over
the life of the loan. Both are issued at the time of purchase for a
modest, one-time premium.
Before issuing a policy, however, the title company performs an extensive
search of relevant public records to determine if anyone other than you
has an interest in the property. The search may be performed by title
company personnel using either public records or more likely, information
gathered, reorganized and indexed in the company's title "plant."
With such a thorough examination of records, any title problems usually
can be found and cleared up prior to your purchase of the property. Once a
title policy is issued, if for some reason any claim which is covered
under your title policy is ever filed against your property, the title
company will pay the legal fee involved in defense of your rights, as well
as any covered loss arising from a valid claim. That protection, which is
in effect as long as you or your heirs own the property, is yours for a
one-time premium paid at the time of purchase.
The fact that title companies work to eliminate risks before they develop
makes the title insurance decidedly different from other types of
insurance you may have purchased. Most forms of insurance assume risks by
providing financial protection through a pooling of risks for losses
arising from an unforeseen event, say a fire, theft or accident. The
purpose of title insurance, on the other hand, is to eliminate risks and
prevent losses caused by defects in title that happened in the past. Risks
are examined and mitigated before property changes hands.
This risk elimination has benefits to both you, the homebuyer, and the
title company: it minimizes the chances adverse claims might be raised,
and by so doing reduces the number of claims that have to be defended or
satisfied. This keeps costs down for the title company and your title
premiums low.
Buying a home is a big step emotionally and financially. With title
insurance you are assured that any valid claim against your property will
be borne by the title company, and that the odds of a claim being filed
are slim indeed.
Isn't sleeping well at night, knowing your home is yours, reason enough
for title insurance?
Article by CLTA
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