When you purchase a property, you will want to have diverse types of insurance coverage to protect that property. General other types of insurances safeguard the home from external impacts like fire damages, theft, or damage from flood or wind. But how can you protect yourself from mistakes in your title rights to the property? In such situations, it is the title insurance that comes to the recuse by avoiding the irreversible damage to the investment. Keep reading below to know more about title insurance and its importance.
What Is Title Insurance?
Title insurance is a type of secured cover that safeguards both titleholders (owners) and lenders that may be caused due to any defects in the title to a property. There are two types of title insurance, one covering the lender, which is mandatory and the other is owner’s title insurance which is optional.
A mortgage lender’s policy is needed for surety in refinancing the deal, and the owner has to pay it before closing the deal. If there is any probable issue, this lender’s policy will only safeguard the mortgage lender for the total amount of the finance procured for the loan.
An owner’s insurance policy is optional and will protect the purchaser. Even though it is optional for the homeowners to get this policy, it is highly suggested to ensure that owners are safeguarded from any legal problems that could arise to the ownership of the title.
How does title insurance work?
Regardless of applying to lenders or homeowners title insurance policy, a title insurance firm will initiate the process by checking the history and reliability of the title. The title insurance company verifies if there are any hidden heirs to the land or property, any unpaid taxes or liens, any pending legal course, or scams linked to the title. Once this is checked, the title insurance company will decide whether to issue a policy or not. If they are ready, then there will be an agreement that states that the firm will repay you for all the financial losses or any legal fees if there are any claims to the title. Title insurance will safeguard you from all the issues related to title that may be present before purchasing the property but were hidden while closing the deal. It will not help you in any issues related to flood, theft, fire, or any kind of damage to the property.
Importance of title insurance:
Whenever a property is sold, there will be changes in the title rights to that property. There are probabilities of any issues that may arise at any time leading to a loss in investment for the owner. These defects in the title will be handled by the title insurance policy and protect in the below situations.
- Safeguards the savings against any losses arising out of the defective title.
- Negates the risk that may be present in real estate transactions.
- Real estate investment will be safe, fast, and have transparency.
- Covering the losses due to any legal processes.
What is a title defect?
- A defect in the title is malicious or hidden activities that can negate or restrict your ownership of the title. Some examples include:
- Illegal documents are caused by fraud, forgery, or any other relative activity.
- No proper authorization for transfer ship of any documents.
- Hidden easements that do not appear on the land or property.
- A relative document that impacts the title and not accurately implemented, witnessed, signed, notarized and closed.
- Restricted access to and from the property or land.
- A document performed by an attorney who is retired, forged or has no appropriate powers to execute the deed.
- Claim to ownership of the title by hidden heirs.
- Any hidden agreements that affect the rights to ownership of the title.
- Any pending lien for legal and authorized persons pending payments for the works that started or completed on or before purchasing the policy.
- Lien for any work or supplies fixed to the property without the permission of the owner.
- Pending payments to any kind of works on the property.
- A deed of trust or mortgage to the property.
- Any pending taxes, judgment to the property.
- Other types of claims that may restrict ownership rights to the title and not listed in the policy.
How long is title insurance good for?
- Title insurance coverage starts as your purchase the policy and ranges completely into the past. It includes both clear and hidden discrepancies in the recorded ownership history. The payment will be done only once when you buy the policy and may only need to add-on if you want to extend the range of coverage from the original one.
- A lender’s policy is valid till the loan is cleared but an owner’s policy will be valid until the owners or heirs will have ownership of the property. So, ensure to preserve your policy even after selling the property or transfer the title.
- If there are any additions to the property or enhancements in the value of the property, you can extend the protection range by adding additional coverage to your policy. If you do not do this, you will only be insured for the original value of the policy.
- Reliant to the type of policy purchased, it might not offer coverage as you transfer your ownership rights to the title for a person who is not insured. Hence, it is important to understand all the aspects relative to the policy and associate with a reliable title agent who is an expert in all the involved circumstances.
As you are ready to close a deal for buying a property, it is important to be sure about the title for being safe in the future. Failing to safeguard your title may lead to situations incurring huge financial losses or legal settlements. Be clear to get title insurance from a reliable and experienced title insurance company in Utah, Utah Title.