TITLE INSURANCE 101

What is Title Insurance?

When you purchase your home you want to be sure that there are no problems with the home's title and that the seller really owns the property. A policy of title insurance protects against losses that may occur . This protection is effective as of the issue date of the policy. If you have a lender or refinance your current property, the lender will also require a Lender’s title insurance policy.

Title insurance insures that the title to your property is clear, with no known liens or encumbrances, such as unpaid property taxes, recorded liens, or street and sewer easements. If a title defect is discovered after the policy is issued, such as an undiscovered easement or forged deed, your title insurance company will seek to resolve it.

Another important fact that the majority of buyers don’t understand is that there are actually two types of title insurance policies—a Loan Policy, which protects the lender, and an Owner’s Policy, which protects the homebuyer.

It is worth noting that no matter how far back the title issue goes, a title claim is filed against the property’s current owner of record. For instance, there might be a missing heir from a previous owner who comes forward after the property was bought and sold several times to different owners. The claim would be filed against the property (and current owner), even though the claim is from the past.

Who pays the premium for Title Insurance?

The answer to this questions varies from locality to locality. In the Kansas City Metropolitan area, the seller usually pays for the owner’s policy and if there is a lender, the buyer pays for that policy. In a refinance the borrower usually pays. However, all this is negotiable and should be worked out before the closing between all the parties. Your escrow officer can advise you as to who normally pays the premium in your area.

How much Title Insurance Will I Need?

The homebuyer should insure the full purchase price of the property; the lender only requires title insurance to cover the amount of your loan.