Title insurance is a form of compensation insurance, which protects you from financial loss from defects in a property. The most common type of title insurance is the lender’s title insurance, where the borrower purchases the coverage only to protect the lender. Owner’s title insurance is often paid by the seller to protect the buyer’s shares of the property and may be available separately.
- An insurance claim is a formal claim made by an insurance company to provide coverage or compensation for a loss or policy event covered by an insurance company
- The insurance company validates the claim and, once approved, issues payments on behalf of the insured or to an interested party.
- For property damage insurance, such as your car or home, a claim can cause you to raise rates for your future premiums.
How title insurance work
As with any real estate deal, a clear title is required. Every title must be searched to see if they have any kind of claim or license against them before they are issued.
Title Search is a public record check to determine and confirm the legal ownership of a property and to determine if there is any claim to the property. Incorrect surveys and unresolved building code violations are just two examples of scars that can become a “dirty” title.
Title insurance protects property owners and lenders from harm resulting from defects in their rights, interests, rights or lack of real ownership of the property. Unlike traditional insurance that protects against future events, title insurance protects you from claims for past occurrences.
The principal owner’s basic insurance policy generally covers the following hazards:
- Ownership by another party.
- Incorrect signs on documents, as well as forgery and fraud concerning title documents
- Defective recordation
- Restrictive covenants, such as unrecorded easements
- Encumbrances or judgments against property, such as outstanding lawsuits or liens
In lieu of title insurance, some personal transactions may include a title warranty, which is a guarantee to the seller that the seller has the right to transfer ownership and no one else has the right to the property.
Types of Title Insurance
- LENDER’S INSURANCY ( LOAN POLICY )
- This insurance protects the lender against loss for as long as they have an interest in the property.
- This insurance is usually covered for the duration of the mortgage loan.
- The loan policy is usually included in the loan amount.
- OWNER’S INSURANCE ( OWNER’S POLICY)
- This protects the property owner and their heir(s) for as long as they own the property.
- This type of title insurance is used to pay for defense against any valid claims on the title.
Facts About Title Insurance
- How much does an Owner’s Policy Cost
The cost of the owner’s title insurance policies is based on the purchase price of the home and is a fixed rate in the state of Louisiana.
- How often do you make payments?
Title insurance is optional, and not required to make a home purchase. This one-time fee is usually included in the closing cost if you have told Title attorney that you want to purchase title insurance.
- How Long does your policy last?
The owner’s policy lasts as long as you or your heirs retain an interest in the property or remain liable for any warranties on the property. The lender’s policy is effective for the life of the loan.
Reasons to purchase Title insurance
Buying a home is both exciting and scary. To make that decision with more confidence make sure that you’re purchasing owner’s title insurance. Here are some reasons why it’s so important to you:
- You can’t beat the value.
Owner’s Title insurance is a one time fee that typically costs less than 0.5% of the purchase price. A relatively low cost for the long – term value it provides.
- Protect your Largest Investment.
You already insure everything else that’s important to you – vehicle, health, personal property, etc. It only makes sense to protect the largest investment you will ever make.
- Reduce your Risk
Like anything in life, there is always some amount of risk involved when purchasing a house, and you never know what hidden issue may pop up after the fact. Purchasing Owner’s Title insurance protects you from legal title issues as forgery, fraud, outstanding mortgages, pending legal action, and unknown heires.
- No Comparison
Homeowner’s insurance and warranties will only protect inside the home, but getting Owner’s Title insurance ensures that your family ‘s (and their heirs) property rights stay protected.
- Peace of mind
It’s had to put a value on the peace of mind, but Owner’s Title insurance gives you the knowledge that you won’t be stuck – emotionally or financially – with existing debts or legal problems once you close your home.