What Is Title Insurance?

What Is Title Insurance?

Title insurance is an insurance policy issued at the closing of Florida real estate.  It is a product that protects owners and/or lenders from future monetary losses due to prior title risks.

There are two types of title insurance policies: an owner’s policy and a lender’s policy. An owner’s policy is issued for the purchase price of the property and insures the owner’s title so long as the owner remains the owner of the real estate. It is a one-time fee based upon the purchase price of the property. The lender’s policy insures the lender up to the loan amount against matters which could invalidate the mortgage or would have lien priority over the mortgage.

If a claim is made against the owner, the title insurer will defend the owner’s interest in any court case which may arise, and if the claim is valid, either pay the claim up to the amount of the policy or incur the costs to resolve the claim and clear title. The cost of litigation will likely far exceed the cost of the title premium. A lender is protected in a similar way, up to the outstanding principal balance of the insured mortgage.

What does a Title Company do?

In a nutshell, the title company is in the driver’s seat of the real estate transaction once the property is under contract. We communicate with all parties involved (buyers, sellers, REALTORS, lenders and others) to make sure every I is dotted and every T is crossed to facilitate title transfer and funding for your transaction.

 In preparing the transfer of title, we carefully review the title, as recorded in the public records, and any property history that is relevant, including property taxes, codes, utilities and permit issues.  After a determination is made on ownership, any corrective actions needed to insure proper title to the new owners are taken. The title company also communicates with the current mortgage company to get accurate payoff information, and with any homeowner’s associations.   It then schedules and conducts the closing, receives and disburses closing funds, records appropriate documents in the public records and issues the Owner’s and Lender’s Title Insurance Policies to the new owner and lender.  For more information on Title Insurance, contact us today.

Why do I need Title Insurance?

Title insurance is an insurance policy or contract issued by a title company. It protects you, the purchaser or owner, against a loss that may arise because of a defect in your ownership or an interest you have in real property.

In addition, the title insurance company agrees to defend you in court if there is an attack on your title. It will cover attorney and court expenses or pay a loss caused by the defect in title up to the face amount of the policy subject to the terms listed in your policy.

What Types of Policies Are Available to Me as a Homeowner?

For the average property owner, there are two different types of title insurance policies that you need to be aware of:

  • Owner’s Policy of Title Insurance
  • Loan Policy of Title Insurance

Since most property owners mortgage or borrow money at the time of purchase or during ownership, the lender can be expected to request protection of its investment against loss. Lenders know that many things can cause loss of title and that expenses are incurred while defending an attack. They insist upon a Loan Policy of Title Insurance to protect their stockholders’ and investors’ investment in your property.

An Owner’s Policy of Title Insurance protects your investment (equity) as the buyer or owner of the property. As the owner, you should want to have the same assurance as the lender that the investment you have made cannot be lost because of a problem or defect with the title.

How Does Title Insurance Differ from Other Types of Insurance?

Title insurance is different from other types of insurance in that it protects you, the insured, from loss that may occur from matters or defects from the past. Other types of insurance such as auto insurance, life insurance, or health insurance, cover you against losses that may occur in the future. Title insurance does not protect against a defect that may originate later.

What Are the Risks?

There are numerous defects or problems that can arise to cause an attack to or loss of the title to your property. Some of these include problems not disclosed by the most careful search of the public records (the title search). Hidden risks can cause a total loss of your investment or heavy legal expenses in the defense of an attack on the title.

Some title problems may show up months or years after the original purchase of the property. The following are examples of matters that can cause loss of title or an expensive lawsuit:

Common Title Risks

  • Claims by missing or undisclosed heirs
  • Incorrect legal descriptions in prior deeds
  • Missing prior satisfactions of mortgages
  • Federal IRS or State of Florida liens
  • Judgments against the current or prior owners
  • Undisclosed easements or rights of way
  • Delinquent property taxes or homeowner’s assessments
  • Survey matters
  • Lack of legal access
  • Forged signatures
  • Failure of spouses to join in conveyances
  • Deed from minors
  • Errors in indexing of the public records
  • Unprobated wills
  • Mistakes in recording legal documents