What is a Loan Policy?
Lenders require a Loan Policy when they make you a loan. This protects the lender's interest in the property should a title problem with the title arise. The Loan Policy is based on the dollar amount of your loan; it decreases each year as the loan is paid off.
What is an Owner's Policy?
An Owner's Policy fully protects the buyer should a problem arise with the title. It also pays for any legal fees defending your title.
How am I Protected?
In order to issue title insurance, the title company must search public land records for matters affecting that title. Twenty-five percent of title examinations find a title problem that is fixed before the insurance is issued. Occasionally, hidden hazards emerge after closing. Problems such as mistakes in the public record, previously undisclosed heirs claiming to own the property, or forged deeds could affect the title. Owner's title insurance offers financial protection against these by negotiating with third-parties, and paying claims and the legal fees involved in defending the title.
I am refinancing, why do I need title insurance?
When you refinance you are obtaining a new loan, even if you stay with your original lender. Your lender will require lender's title insurance to protect their investment in the property. You will not need to purchase a new owner's title policy, the one you bought at closing is good for as long as you and your heirs have an interest in the property. Even if you recently purchased or refinanced your home, there are some problems that could arise with the title. For instance, you might have incurred a mechanics lien from a contractor who claims they have not been paid. Or you might have a judgment placed on your house due to unpaid taxes, or child support for instance. The lender needs reassurance that the title to the property they are financing is clear.
I am buying a newly built home, do I need title insurance?
Construction of a new home raises special title problems for the lender and owner. A title search will uncover any existing liens and a survey will determine the boundaries of the property being purchased. In addition, builders routinely fail to pay subcontractors and suppliers. This could result in the subcontractor or supplier placing a lien on your property. Again, lenders want to be sure the property has clear title, and they are insuring the correct property. Purchasing owner's title insurance will protect you against these potential problems and pay for any legal fees involved in defending a claim.
