Why Title Insurance?
Your purchase of a title insurance policy is required by your lender. Today’s nationwide mortgage practices have made title insurance a necessary part of the residential closing and escrow process in most cases in Ohio. Basically, there are two types of title insurance policies: one to protect the lender and one to protect the owner of the home. You are required to provide a policy that protects the lender; you are encouraged to purchase an additional policy which will protect you.
The lender’s policy insures the lender that is has a valid first mortgage on your property. The owner’s policy insures you that you have good title to your own property. If it is later found that there is “something wrong” with your title, the lender is protected under its insurance policy. If you have not purchased a title insurance policy of your own, you will have no protection and you may sustain a serious loss.
“Something wrong” is usually taken to mean “title defects”. The examination of a land title and the real estate closing are complicated functions. Unforeseeable problems may exist, and honest human error is always a possibility. These problems can be “title defects”. When you buy a house, you get more than a building. You get title to a piece of Mother Earth – a piece that others have owned before you. You want to know that you now own a clear title and you want to know if that title is subject to anything, such as building restrictions or drainage easements. The owner’s title insurance policy is designed for that purpose.
It’s protection against loss if a defect is found in your title. When you buy a home, you are given a title to the property that generally means you receive FULL LEGAL OWNERSHIP. But, sometimes there’s a hidden mistake in a prior deed, will, mortgage, etc. that may give someone else a valid legal claim against your property.
Because it provides a “safety fence” around your property. Having title insurance can save you money, time and trouble…even your home! Here is how it works:
- The lender-when you buy property, you are commonly required to buy title insurance. This covers the outstanding balance on the mortgage for the lender, but does not protect you.
- The buyer-When acquiring property, it’s a good idea to get your own title insurance policy. It will give you peace of mind and maximum protection in case there’s a claim against your home.
- The owner-Even if you don’t intend to sell, you should consider title insurance. It’s a good way to protect your investment.
- The seller-Buying title insurance can make your property more attractive to prospective purchasers.
- Errors-incorrect information in deeds, mortgages, public records, etc., such as wrong names.
- Liens-claims against the property or the seller which become the new owner’s responsibility after the sale. Examples are unpaid mortgages, taxes, sewer and water assessments, bills owed to workers or other creditors, etc.
- Claims to ownership-for instance, a claim to “marital interest” by the spouse of a former owner or by a child of a former owner who was not mentioned in his or her parents’ wills.
- Invalid Deeds-for example, transfer by a previous seller who did not actually own the property, or by a previous owner who was not mentally competent. Many of these problems might not be discovered in a routine title search.
- You pay a one-time premium. Costs vary from state to state. Check with your lender, attorney or title company for costs in your area.
- Ask about simultaneous policies issued by the same insurer to the buyer when lender’s policy is issued-often a big saver.
- Ask about reissue policies based on previous owner’s insurance-premiums are lower.
- Notify the title insurance company at once, in writing. Include with the letter a copy of all related letters and documents.
- The company will negotiate with the other party to settle the claim, defend your title in court if necessary, satisfy any covered claim for which it is responsible and pay any legal costs incurred in defending title.
