Attorney
If you’ve ever purchased a home or a piece of land, you’ve likely heard the term “title insurance”. What is title insurance and why might you need it? Title insurance is a crucial yet often overlooked aspect of the home buying process. While most homeowners are familiar with the concept of homeowners’ insurance to protect against damage to their property, many may not be as familiar with owner’s title insurance and its importance. In this blog post, we’ll explore what owner’s title insurance is, why it’s essential, and how it can safeguard your most important investment – your home.
What is Owner’s Title Insurance?
Unlike traditional homeowners’ insurance that protects against damage to your property, owner’s title insurance is a type of insurance policy that protects homebuyers and mortgage lenders from financial loss due to defects in the title of a property that occurred prior to you owning the home. These defects could include undisclosed liens, encumbrances, legal judgments against the property, or even forged signatures on documents related to the property’s ownership history.
Why is it Important?
1. Protection Against Title Defects:
The primary purpose of owner’s title insurance is to provide protection against unforeseen issues with the title of the property. Even after a thorough title search, there may be hidden defects or errors (what we refer to as “clouds” on title) in the title chain that could result in legal disputes or financial loss. Owner’s title insurance offers peace of mind by covering the costs associated with defending your ownership rights and potentially resolving any title issues.
An example of a defect or error in the title chain might include a deceased individual who was on title, but their estate was never probated and therefore, their estate retains an interest in the property. Another example is a husband was the only one on title, the property was the homestead, but both spouses did not execute the deed when they conveyed the property. The wife, although not on title, should have joined in the signing of the deed to extinguish all homestead rights to the property. Title insurance would provide coverage in the event one of these “clouds” on title was discovered after the home is purchased.
2. Safeguarding Your Investment:
Purchasing a home is one of the most significant investments you’ll make in your lifetime. Owner’s title insurance helps safeguard this investment by providing financial protection in case of title disputes or claims against your property. Without title insurance, you could be at risk of losing your investment or facing costly legal battles to assert your ownership rights. In the event that you need to file a claim against your owner’s title policy, the title insurance company would essentially step in and defend your rights in the property on your behalf in order to clear any defects that would otherwise be a cloud on your title.
3. Lender Requirements:
While owner’s title insurance is optional for homeowners, most mortgage lenders require a lender’s title insurance policy to protect their financial interests in the property. However, the lender’s policy only protects the lender’s interest in the property and does not provide coverage for the homeowner. Purchasing owner’s title insurance ensures that you have comprehensive protection for your investment, in addition to meeting your lender’s requirements, and title insurance companies often provide a “simultaneous issue” credit if both lender’s and owner’s title insurance is purchased.
Owner’s title insurance is a crucial safeguard for homeowners, offering protection against unforeseen title defects and potential financial loss. While it may seem like an additional expense during the home buying process, the peace of mind and financial security it provides far outweigh the cost over the long term. By investing in owner’s title insurance, homeowners can protect their investment and ensure a smooth and worry-free homeownership experience.
If you have questions about title insurance or are in the home buying process and would like legal representation, contact the experienced real estate attorneys at Boatman Ricci today at 239-330-1494 to schedule a consultation.
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