Title Insurance: Questions and Answers
Q:
What is title insurance?
A: An insurance
policy--protecting against loss should the
condition of title to land be other than as
insured.
Q:
Why do I need title insurance?
A: When you buy
a home, or any property for that matter, you
expect to enjoy certain benefits from ownership.
For example, you expect to be able to occupy and
use the property as you wish, to be free from
debts or obligations not created or agreed to by
you, and to be able to freely sell or pledge
your property as security for a loan. Title
insurance is designed to cover these rights you
bargain for.
Q:
What if I have a problem? Do I
have to lose my property to make a claim?
A: Not at all.
At the mere hint of a claim adverse to your
title, you should contact your title insurer or
the agent who issued your policy. Title
insurance includes coverage for legal expenses
which may be necessary to investigate, litigate
or settle an adverse claim.
Q:
What does this cost?
A: The cost
varies, depending mainly on the value of your
property. The important thing to remember is
that you only pay once, then the coverage
continues in effect for so long as you have an
interest in covered property. If you should die,
the coverage automatically continues for the
benefit of your heirs. If you sell your
property, giving warranties of title to your
buyer, your coverage continues. Likewise, if a
buyer gives you a mortgage to finance a purchase
of covered property from you, your coverage
continues to protect your security interest in
the property.
Q:
If my lender gets title insurance for its
mortgage, why do I need a separate policy
for myself?
A: The lender's
policy covers only the amount of its loan, which
is usually not the full property value. In the
event of an adverse claim, the lender would
ordinarily not be concerned unless its loan
became non-performing and the claim threatened
the lender's ability to foreclose and recover
its principal and interest. And, in the event of
a claim there is no provision for payment of
legal expenses for an uninsured party. When a
loan policy is being issued, the small
additional expense of an owner's policy is a
bargain.
Q:
Can you be a little more specific about the
types of claims, or risks, covered by title
insurance?
A: Sure. First
understand there are basically three different
levels of coverage: Standard coverage, extended
coverage, and our most comprehensive "EAGLE
Policy" coverage.
Standard
coverage handles such risks as:
- Forgery and
impersonation;
- Lack of
competency, capacity or legal authority of a
party;
- Deed not
joined in by a necessary party (co-owner,
heir, spouse, corporate officer, or business
partner);
- Undisclosed
(but recorded) prior mortgage or lien;
- Undisclosed
(but recorded) easement or use restriction;
- Erroneous or
inadequate legal descriptions;
- Lack of a
right of access; and
- Deed not
properly recorded.
An extended
coverage policy may be requested to protect
against such additional defects as:
- Off-record
matters, such as claims for adverse
possession or prescriptive easement;
- Deed to land
with buildings encroaching on land of
another;
- Incorrect
survey;
- Silent
(off-record) liens (such as mechanics' or
estate tax liens); and
- Pre-existing
violations of subdivision laws, zoning
ordinances or CC&R's.
Subject to
availability in your locale, First American's
EAGLE Policy covers all of the risks listed
above, plus:
- Post-policy
forgery;
- Forced
removal of improvements due to lack of
building permit (subject to deductible);
- Post-policy
construction of improvements by a neighbor
onto insured land; and
- Location and
dimensions of insured land (survey not
required).
