What is Title Insurance?
First things first: the word "title" refers to your legal right to own, use, mortgage and sell real property. Title Insurance is there to protect your legal interest, and often that of your lender, in your property.
Your Lender's Policy v Your own Personal Policy
Many mortgage lenders require that you purchase a title insurance policy that covers their interest in the property. This policy, however, does not cover you as the owner of the property. For instance, a situation arose in Salmon River area this year when a home buyer was surprised to find that the backyard of his home did not belong to him, despite believing it was included in the purchase. There was no possibility that he would be covered by title insurance because only a lender policy was purchased. So make sure to find out from your lawyer whether or not an owner policy is being purchased in addition to the policy required by your lender.
The lender's policy is there to protect only the bank's interest in the property. It usually covers only up to the amount of the mortgage. This policy is only in effect while the mortgage is in place, once the mortgage is paid out and discharged this protection expires.
In order to protect your own interest in your home, and cover the costs of any associated losses you will want to purchase an owner's policy at the same time that you are buying the lender's policy. This policy protects you for the entire time that you own your property. It is usually for the amount equivalent to the purchase price.
Why you should have it, and why it is preferable to a survey.
Some of the things title insurance would cover are:
· Fraud or forgery;
· Encroachments, easements, or boundary issues;
· Zoning non-compliance;
· Building permit issues from when the home was constructed;
· Unknown defects in your title.
A survey is great for determining exactly where your boundaries are, however, it is only accurate as of the point in time it was done, and it is only good for the person who contracted the surveyor. Unlike title insurance it will not cover future issues.
It is a one time fee at the time you purchase you home, however, you can purchase a policy at any time. The cost is usually in the ballpark of $250.00. It provides a lot of peace of mind for minimal cost.
If you would like to know more about what is covered, here are links to the webpages for the major title insurance providers:
Also, here is a short video provided by Chicago Title Insurance that will give you a brief summary of what Title Insurance is, and why you should have it.
By: Briana C. O’Grady, J.D. – Associate Lawyer
If you have general questions about buying, selling or refinancing your home you can contact us. We offer a flat fee consultation service. There is no commitment. You can come in to chat and ask questions. We can offer some advice about what your options might be.
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