What is Title Insurance?

Buying a home is a complex process, and often one of the largest investments in an individual’s life. The process of buying a home is full of important details that should be considered carefully to ensure that each step in the process is clearly understood. One of the most important, and often overlooked, steps is purchasing a title insurance policy from a title insurance company. For immediate assistance with your real estate transaction or title insurance question, contact our North Florida Title Insurance Company today, or request a title insurance quote online.

Types of Title Insurance Policies

What is Title Insurance?
What is Title Insurance?

There are primarily two types of title insurance policies that an average purchaser will encounter:

While most mortgage lenders require borrowers to purchase a lender’s title insurance policy at closing, few buyers really understand why they need a lender’s title insurance policy or what they are buying. Moreover, borrowers often mistakenly assume that their investment is protected by the lender’s title insurance policy when, in reality, a separate owner’s title insurance policy is needed to provide full protection and insurance against title defects for the new homeowner.

So, What Is Title Insurance?

A title insurance policy, essentially, provides an assurance that you really own the property you think you own and that this property is either free from any defects or “clouds” in the title or that any such “clouds” are disclosed to you prior to your purchasing the property. When you purchase title insurance, the protection you are buying is based on a title search or title abstract created from reviewing the public records in the county where the property is located. This public records title search traces the chain of ownership of the property involved, and includes a guarantee from the title insurance company that the title to your real estate is accurate as stated and clear from any “clouds.”

This initial title search and title examination are important in identifying title problems before your real estate purchase is completed. While almost all other forms of insurance protect you against future events, a title policy is designed to protect you against the hazards of the past.

Owner’s Title Insurance Policy

An Owner’s Title Insurance Policy protects the home buyer’s interest in his property and is normally issued with title insurance coverage in the amount of the purchase price of the property. Coverage means that the insurer will pay all valid claims on the title as insured.

In addition, the title company will pay all legal fees for defending against any attack on the title as insured, as long as the purchaser, or his/her heirs, retain an interest in the property.

Lender’s Title Insurance Policy

In most areas of the country, the mortgage lender requires that the home buyer purchase a lender’s title insurance policy to protect the lender’s security interest in the real estate. Lender’s title insurance is issued in the amount of the mortgage loan. The amount of coverage decreases, and finally disappears as the mortgage loan is paid off.

Why Purchase Owner’s Title Insurance?

When you buy North Florida real estate, you expect to obtain clear title to the property you purchase. If challenged and you successfully defend your rights of ownership in court, there probably will be legal fees and costs to be paid. If your defense fails, you could lose the property, or at least experience a serious financial loss, which is where your title insurance policy kicks in.

Many title insurance experts believe that an owner’s title insurance policy is an absolute necessity, even if your real estate attorney performs a title examination and assumes liability for his work. When a real estate attorney performs a title examination, his liability is limited to negligence and does not include responsibility for any hidden title problems or other “clouds” that would be covered by an owner’s title insurance policy.

As a result, the cost of defending against a title claim and the expense of a title loss may become the sole responsibility of a real estate purchaser, or mortgage lender. For these reasons, most lenders require home buyers to purchase lender’s title insurance policies. This is also why home buyers should seriously consider buying a separate owner’s title insurance policy at the time of purchase. In many cases when purchasing a title insurance policy in North Florida, the cost of the owner’s title insurance policy may be paid for by the seller of real estate.

Remember, even if you buy property for a seller who owned the real estate for a relatively short time, you will need an up-to-date title search, and new owner’s title insurance to be protected because the title insurance of a previous owner will not protect a new buyer.

Purchasing Your Own Owner’s Title Insurance Policy

A new owner’s title insurance policy is also important because, previously undisclosed title problems could emerge from the distant past, or there may be new problems that have developed, even though the seller owned the property for only a short time. The seller may have been divorced, become bankrupt, or agreed to an easement across the property. A new owner’s title policy will protect you against these types of problems.

Contact A North Florida Title Insurance Agent

We are happy to assist you with closing your real estate transaction, lender’s title insurance policies, owner’s title insurance policies, or other title insurance issues. Our North Florida Title Insurance Agents have decades of experience ranging from simple to complex title insurance issues. Contact our North Florida Title Insurance Agents for fast, efficient, personal service with your next real estate transaction by calling 386-362-4419.

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