Title Insurance
May 4th, 2006 Insurance
There are many important financial decisions we make in our lives, from the type of education we get to the type of career we embark on to how we save for retirement. There is perhaps no financial decision more important than the choice of the roof over our heads, and for most of buying a home will be the most expensive and most significant financial decision we will ever make.
There are of course many decisions that must be made during the home selection and home buying process, but one of the most important is the acquisition of title insurance. Title insurance is a vital purchase, since it is designed to protect you in the event that another party has a claim on your home. While a thorough title search is generally part of the home buying process, title insurance will help protect you from unpleasant surprises.
The title policy will be part of the pack of documents presented at the closing, and the title insurance policy will generally be placed at the top of the stack of documents for easy accessibility. There are a number of different parties that may have a claim on a piece of property, including lenders, contractors, government agencies or the relatives or heirs of the seller of the property.
During the loan process the title company will do a search of all records concerning the property being purchased, including unpaid tax liens, unpaid contracts from prior sellers, judgments, and mortgages with unpaid balances. In addition there may be easements and restrictions on the property as well, and the title company will uncover them as well.
The idea behind the title insurance policy is to cover defects not found by the time of closing, and the title insurance will cover the claims defined in the policy. The title policy will protect the buyer if the seller was incapacitated or if there was a forgery. The title insurance policy will also provide protection in case there are heirs that were not mentioned on the title, or other unforeseen circumstances.
During the loan process, the buyer of the home will receive a copy of the preliminary title report saying that the title company is prepared to issue a title insurance policy. This document will provide the amount of coverage and the cost to the buyer for that coverage.
That report will also include a legal description and a map of the property, and it will show any areas that need to be cleared. The report will also list those who are legally vested in the property. It is the responsibility of the buyer to examine this preliminary report carefully and raise any concerns at that time.
It is also the responsibility of the buyer to read and understand the title insurance policy. If any parts of the insurance policy do not make sense to you it is important to point them out at that time. The buyer will be allowed at least a day before the closing to review all closing documents, and it would be a smart idea to set aside some time to review the policy and make sure there are no problems.