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Frequently Asked Questions About Title Insurance

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What is title insurance?

Title insurance is a type of insurance policy that protects an owner’s title, or ownership rights, to a property. Find out more here.

Do I have to buy title insurance?

If you are taking out a mortgage to pay for a property, buying lender’s title insurance is typically required. Purchasing owner’s title insurance, which protects the borrower, or property buyer, is optional.

What’s the difference between owner’s and lender’s title insurance?

Lender’s title insurance, which is the type that’s typically a required purchase, covers the amount still owed to the lender on the mortgage at the time the title defect is discovered. This protects the lender (the institution that holds the mortgage) from losing out if there turns out to be a problem with the title. Owner’s title insurance protects the borrower, or property buyer. An owner’s title insurance policy reimburses the borrower for payments already made on a property’s mortgage before finding out about any title problem.

What’s the difference between title insurance and homeowner’s insurance?

Title insurance and homeowner’s insurance are most definitely not the same thing, and one is not a replacement for the other. Title insurance protects an owner’s title, or ownership rights to a property. Homeowner’s insurance, on the other hand, is a type of property insurance that protects against damage to a home or the home’s contents. It can also provide liability coverage for accidents that occur on the property.

How much does title insurance cost, and how can I save money?

In Pennsylvania, as well as in many other states, title insurance rates are regulated by the state. This means that title insurance premiums, which are based on the purchase price, are the same no matter which title insurance company you choose. However, some title insurers charge more in additional fees than others, so it’s a good idea to get multiple quotes and read them closely. Another way to save money is to look for a company that will offer a discount on an owner’s policy if it is purchased alongside a lender’s policy. However, don’t only look at price: It’s also important to have confidence in the financial stability of the company that’s holding your policy so that you can rest assured they would be able to satisfy your claim.

How long does title insurance last?

Title insurance is purchased with a one-time premium, instead of annual or monthly payments like other types of insurance. Lender’s title policies last as long as there is a mortgage on the property, while owner’s title policies last as long as the insured owner–or his or her heirs–hold the title to the property.

Can I choose where to buy title insurance?

Yes. Although your lender (or even a realtor or attorney) may recommend a title insurer, you may ultimately choose the company with whom you’re most comfortable. The choice of the insurer is up to the buyer, not the lender or the seller.

What does a title policy cover?

A title insurance policy protects against the possibility of finding about what’s called a title defect after the purchase of a property. A title defect can invalidate your ownership rights to a property, and a title insurance policy can protect both the buyer of a property and their lender from potential financial loss associated with discovering such a defect after the purchase of a property. Before issuing a title policy, the title company will also conduct a title search to try to uncover any title defects that may affect the purchase. If a defect is discovered after the purchase, a title insurance policy may also cover legal costs associated with defending your claim and/or validating the claim,  as well potential losses resulting from a covered title defect.

What is a title defect?

A title defect, also known as an unmarketable title or a clouded title, is something that can interfere with your ability to buy or sell a property. A title defect means that there is some complication in verifying the owner of a property, which negates their ability to truly own or sell rights to the property. For example, title defects can include forged or improper documents, errors in the public record, liens, contested wills that involve the inheritance of a property, and disputes over a property’s boundaries. Keep in mind that a title defect can occur years before you purchase the property and lie dormant until something happens to bring it to light.

What is the difference between a basic and enhanced title policy?

The differences between a basic and an enhanced title policy will depend on the specific policy, so you’ll want to talk it through with your agent and read the fine print. Benefits to an enhanced policy can include coverage for forced removal of structures; post-policy forgery, encroachment or damage from the extraction of minerals; building permit violations; or zoning ordinances that prevent you from using the property how you wish. Enhanced policies can also cover things like paying rent for substitute facilities needed as a result of a title problem and post-policy inflation coverage. It’s definitely worth having a chat with your agent about how an enhanced policy might provide added peace of mind.

If you’re in the market for title insurance, Legalty Transfer can help. Contact us today to get a free quote or find out more about how we can help protect your investment and save you money.