What is Title Insurance?
Buying a home is the biggest investment that most people will make in their lives. This investment needs to be protected. Just as a person who buys a new car needs to protect it by purchasing car insurance just INCASE of an accident. A home buyer needs to purchase title insurance INCASE of hidden defects.
Most people understand the need for homeowners or hazard insurance to protect their property against fire, theft, lawsuits, etc. However, defects in the title of your home may pose an even greater threat to your investment. You could lose all or part of your investment because of hidden defects in the title to your home.
A title is the means by which a person may acquire a right of ownership in real property. The title gives the owner the right to possess, use, and enjoy that real property within limitations. It also gives the owner the right to sell and/or convey that property
Unlike most types of insurance, title insurance insures the new owner from the day of closing BACKWARDS. Title insurance protects against hidden defects, examples might be fraud or forgeries on documents such as deeds and wills, missing heirs, defective deeds, clerical errors in records, claims arising because of a married person conveying property without his or her spouse, and transfer of title by a minor. An owner's title policy will protect and defend your investment if any claims are made against your property, whether the claim is valid or not, at no additional cost to you, because the title insurance is purchased at closing and is valid as long as you own that property.
Types of Title Insurance
There are basically two types of title insurance policies - the Owner's Policy and the Lender's Policy.
The Owner's Policy insures the new owner and their heirs, for as long as they own the property. It insures them that they have clear and true title to the property and if any encumbrances come about in the future, which arise from an error in the title search and examination at the time of closing, that the underwriter will continue to insure the title and provide any necessary corrections to remove the encumbrances. The policy contains a "duty to defend" clause so if a third-party claims interest, the underwriter will not only defend their position as an insurer but also the new owner's interest. The fee for this policy is a promulgated rate that is set by the insurance commissioner of the State of Florida and is determined by the purchase price of the property. Basically, the insurance commissioner sets a standard across the board of these promulgated rates and states that a title agency has to AT LEAST charge the promulgated rate for the insurance, however, they can charge more if they choose to do so. Be aware that some title companies can and will charge more for this rate!
At AAA Premier Title Corporation we charge the exact promulgated rate and no more than that.
The other required policy, if the buyer is taking a mortgage, is called the Lender's Title Insurance policy. The Lender's Title Policy insures the mortgage lender that the purchaser is the fee simple owner and the lender is in first lien position. The fee for this policy is a simultaneous promulgated rate that is set by the insurance commissioner of the State of Florida. Simultaneous just means that it is being issued at the same time of another policy on the same property. The promulgated rate is a set fee of $25.00 no matter what the purchase price or loan amount is, however, it again can be higher if the title agent chooses to do so.
Once again, AAA Premier Title only charges the minimum chare of $25.00.
Although a title search and examination of the public records are performed prior to closing there may be problems and defects in the title that may not be revealed in a title exam. Unlike most other types of insurance, the premium for an owner's title policy is paid only one time, usually at closing, yet its protection lasts for as long as you or your heirs own the property.
Hopefully, after reading about title insurance you will understand why it is so important to protect your #1 investment.
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