Buying a house takes a very rigorous preparation from finding the right location, choosing the right community, researching traffic, history, and schools. On top of that, the time you spend just to earn the money to buy the house, and of course, the question of getting a title insurance or title policy. What is the difference between title insurance and title policy? Are they the same or if not, how different can they be from one another? Before you even decide if you will get one or which one to get, a well-informed decision will be best. After all, a good sale is one that covers the after-sale.

What is Title Insurance?

Title Insurance protects both estate owners and lenders from happenings, dealings, and possible compromises concerning the property in question by its previous owners and is paid in a one-time payment. If a claim settlement arises, or if the property is lost to the policyholder, then the insurance company will be paying for it or will be reimbursing the costs related to acquiring the property.

What is Title Policy?

There is no difference between a title insurance or a title policy. One could mean the other and vice-versa.

Is there a difference between Title Insurance and Title policy?

Title Insurance and Title Policy are the same; it is the same contract, same protection, and coverage. However, the term “insurance” and “policy” are different by definition but are often time used and are commonly interchanged. Insurance is the agreement wherein a company or government entity offers warranty or assurance of reimbursement or payment for loss, accident, death, illness, damage, or fraud at a cost for a specified amount of time. Policy or Insurance Policy on the other hand is the contract of insurance where terms and conditions are listed. An insurance policy is divided into five parts: declarations, insuring agreements, definitions, exclusions, and conditions. Some policies have the sixth part which is an endorsement.

Therefore, by technicality, even if title insurance and title policy are part of one contract, providing the same coverage, it is by definition and role that they differ. First is the agreement, the latter is black and white.

The Six Parts of an Insurance Policy

Reading a thirty-plus page contract can be tiring, but it is of the utmost importance that each page of an insurance policy is ready by the policyholder before signing it. The policy is usually divided into five parts, some have six;

1) Declarations – First pages of an insurance policy also known as the information page of the contract, detailing the information of the policyholder and the insured i.e. name, age, address, premium amount, the policy period, limitations and other vital information.

2) Insuring Agreements – This is the part where the promise of compensation to the insured or on behalf of the insured in cases stipulated in the contract. The coverage of the insurance is typically in the insuring agreement.

3) Definitions – To avoid confusion and misunderstanding, every insurance policy has one part dedicated to the terminologies used in the insurance industry. It is important to know the basic terminologies in making sure that mutual agreement is achieved. Some words have common misconceptions like Policy Holder versus Insured, Policy Holder is the person who applied and pays for the insurance while the Insured is the person who is covered or insured by the policy or insurance, the term Premium over the use of payment.

4) Exclusions – One of the most important parts of the insurance policy and if needed, have it clarified by your insurance agent. This is the part of the policy that states what is not covered, instances or situations where you will have reduced claim or no claim at all. Exclusions pave the way for the risks that are out of bounding by what the insurance company is willing to cover. Provisions for exclusion should be crystal clear to both buyer and seller or any policyholder before entering into a contract.

5) Conditions – the part of the insurance policy that enumerates the things that are required form the insured and/or policyholder. This section provides information about the obligations that are needed for the contract to take effect if the insured event happens such as the settlement of premium, reporting, subrogation rights, cancellation, etc. Failure to fulfill the set obligation could result in limited coverage or it could have the policy expunged.

6) Endorsements – Not all policies have endorsements but it is starting to be a practice right now in the insurance industry. Endorsements in an insurance policy allow an avenue of alteration in the existing coverage. Also known as a rider, this allows the policy and the coverage to be amended from the definitions to the main coverage form. It can add, edit, or exclude coverage so endorsement must be reviewed thoroughly.

How does Title Insurance work?

If you are buying a property either for home or for business It is best to be smart about it. It is highly advised to get a title insurance as a first step to ensure that the property you are selling or buying is considered “clean” of any compromising history the property has. That would mean that you need to check on legal aspects, bank records, not to mention the possible unpaid services are done on the property. That’s too much work and will eat up too much time and that where Title Insurance Companies come in the picture. They will search for the title to check for any building code violation, existing claim, liens, legal ownership, unpaid taxes, or anything that will deem it unsafe for you to purchase.

And although they did a thorough check on the property title, they will have you covered still, and here are some of the perils that they will shield you from:

  • Rights of a different party (i.e. conflicting wills)
  • Forgery or inconsistencies in signatures or signatures obtained under duress.
  • Inconsistent records
  • Unrecorded or undeclared easements or restrictive covenants
  • Unresolved lawsuits or liens

The insurance process will be initiated by escrow upon closing or completing the purchase agreement. Most of the time, an owner’s policy and lender’s policy are both necessary to maximize coverage, and there are preferences, but, keep in mind that under the Real Estate Settlement Procedures Act (RESPA), the seller cannot insist on his preference nor require you to get the insurance from a specific title insurance company and you can get in touch with Utah’s Leading Title Insurance Company – Title Guarantee.

What are the risks of not having a Title Insurance?

Getting title insurance is an additional cost, yet this will cover you, your family, and your money. Understandably, you have hesitation, but think about spending your hard-earned money, getting the family settled, parting ways with the seller than all of a sudden, you are visited by a ghost from the past – unpaid taxes! Without title insurance, you as the buyer will need to shoulder that burden and pay the taxes that the seller failed to settle.

By contacting Utah’s Leading Title Insurance Company, your purchase will be as clean as it can be and you will have peace of mind that no matter what, Title Guarantee’s got your back.

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