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What is Title Insurance?
What is Title Insurance? Title is the foundation of real estate ownership, and refers to your legal right to own, use, control, possess or dispose of the home. Before issuing a title insurance policy, a title agent will check for any defects in your title. Your free and clear ownership could be jeopardized if there are any problems with the title, such as a lien filed by someone who worked on the property, unpaid taxes, an easement, an undisclosed claim from an heir of a previous owner, or any number of other possible title defects. Title insurance helps protect you or your lender from prior rights or claims that other parties may have to the property, as well as from any outstanding debts of previous property owners. Title insurance is based upon a public records search, which is evaluated to determine the state of the title at the time of your purchase. In the event that someone challenges your title, the title insurance underwriter (not the title agent or agency) will defend your title and pay all related costs and loss in property value that might ensue, up to the limit of your policy.
There are two primary types of title insurance - A Lender’s Policy and an Owner’s Policy. Your lender may require its own title insurance as a condition of your mortgage loan. A lender’s policy insures the lender’s interest in the title to your home. An owner’s policy will insure you as the property owner against the specific kinds of claims listed in the policy. In Florida, the buyer or seller may purchase both the lender’s policy and the owner’s policy. Title agents, attorneys and title insurance companies may all sell title insurance. Unlike other types of insurance, you pay a one-time premium for your title policy, which remains in effect for as long as you, or any heirs, own the property. Title insurance is your policy of protection against loss.
Adequate Coverage - Separate title insurance policies protect different interests. Although separate policies of title insurance may insure the same property, a person who is not named as an insured is not entitled to any protection by the policy. A title policy that is issued to a lender does not provide coverage for the owner. Likewise, a prior owner's policy will not protect a new buyer. For example, if only a loan policy is issued to a lender and title to the insured property is later determined to be invalid as a result of a forged deed, the lender may be compensated for loss, but the owner may still lose the property due to invalid title and will continue to have the loan obligation to the lender. If the owner had obtained owner's title insurance coverage, the owner would also be compensated for loss of the property according to the terms of the owner's policy.
How does title insurance protect your investment if a claim should arise? If a claim is made against your property, title insurance will, in accordance with the terms of your policy, assure you of a legal defense — and pay all court costs and related fees. Also, if the claim proves valid, you will be reimbursed for your actual loss up to the face amount of the policy.
Are there any problems that a title search cannot reveal? Yes. There are some “hidden hazards” that even the most diligent title search may never reveal. For instance, the previous owner could have incorrectly stated his or her marital status, resulting in a possible claim by a legal spouse. Other “hidden hazards” include fraud and forgery, defective deeds, mental incompetence, confusion due to similar or identical names, clerical errors in the records and many more. These defects can arise after you've purchased your home and can jeopardize your right to ownership. “Title insurance” protects your right to ownership.
How much does title insurance cost? The cost of title insurance varies based on the purchase price of the property. Unlike other insurance premiums, which must be paid annually, a title insurance premium is paid one time only at settlement. The premium is figured based on the purchase price as follows; up to $100,000 = $5.75 per thousand, over $100,000 = $5.00 per thousand (ex: $100,000 = 575.00; $200,000 = $1,075.00).
Who pays for title insurance? In Florida it varies per county and can be negotiated in the contract. The seller generally pays for the title insurance and chooses the title/closing company in most Florida counties. The buyer generally pays for title insurance and chooses the title/closing company in the following counties; Sarasota, Collier, Miami Dade and Broward.
A good piece of advice is always to talk with a Florida Real Estate Attorney.
If you have any Real Estate question, please contact me:
Ana Claudia Nascimento-Realtor/Dunhill 100 LLC
Ana Claudia Nascimento is a Sao Paulo-Brazil native. She speaks English, Spanish and Portuguese. Ana moved from Sao Paulo-Brazil to the Miami Seashores in 1996. In Sao Paulo-Brazil, Ana worked as a Re....
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