Title Insurance

Title Insurance is an insurance policy that protects a lender or an owner against financial losses resulting from defects in the title to the property which is kept as the security for the mortgage loan. Title insurance or home title insurance is a must for all kinds of mortgages.

Before a property is purchased, it may have undergone several ownership changes. There may also be unpaid taxes and other liens created before the effective date of the policy. The title insurance protects the insured party against any legal claims, judgments and legal fees that may arise out of title defects. The amount paid to the insured extends up to the dollar amount of insurance provided by the policy. The title insurance coverage ends on the day when the policy is issued. It extends backwards for an indefinite length of time.

There are in general two kinds of policies: the lender's policy and owner's policy.

• Lender's policy:
  The lenders require title insurance on the property which secures the mortgage loan. The buyer or the owner pays for the lender's policy to protect his interest in the property. The lender's policy protects the insured for the loan he offers against the property. As the loan amount is gradually paid off, the amount of coverage also reduces and with the loan being repaid, the policy is terminated.
  
  
• Owner's policy:
  The owner's policy protects the owner or the buyer against losses due to defects in the title. Either the owner or the seller makes the payment towards the insurance premium. The premium is based on the purchase price and it is paid only once. The owner's policy remains effective as long as the insured or his heirs retain the title to the property.
  

The lender conducts a title search on the property which secures the loan. He appoints title agents who search public records and check out whether it has any lien, judgment or other legal notice issued against it.

Title Insurance Coverage:

• Fraud and identity theft in case a person steals your identification and gets a mortgage loan against your property in your name. The coverage is applied in case of matters which are not found in public records, like interest of missing heirs, status of individuals who do not have the right to sell the property, etc.
  
  
• Survey or title related problems.
  
  
• The previous owner of your property may not have paid taxes as a result of which the municipality creates a lien on your property.
  
  
• When you find out that a building permit was not issued for improvements on the house which you have just bought, you will be responsible for the necessary repairs. The insurance policy offers you the required coverage.
  
  
• If the money required for renovating the property is left to be paid, the builder creates a construction lien on the same property. Even if the repair work is done before you buy the house, you will have to make the payments since you are the current owner.
  

The home title insurance policies protect lenders as well as owners or buyers from financial losses due to title defects. There are policies to protect the lender's interest in the property till the mortgage loan amount is paid off. Similarly, there are policies as well to protect the buyer's investment in the property.