What is Title Insurance?
September 03, 2022Life is filled with uncertainty, which equals risks when it comes to investments. While it is not possible to prevent unwanted events from happening, there are products that serve the purpose of protecting homeowners against losses by compensating them financially. These financial products, known as insurance policies, are made to reduce or eliminate the cost or effect of loss derived from different types of risks.
When it comes to properties, there are two different kinds of insurance. There's homeowners insurance, which will cover any financial loss incurred from physical damage to one's home or property, and title insurance, which protects you and your lender from the property's history by covering costs from issues such as liens, clams, or encumbrances.
Through this article, at Key Title & Escrow, we intend to explain in detail what title insurance is, the entire process that takes place to issue a policy, the different types of title insurance, and what we can offer through our title and escrow services to get your property's title insured.
WHAT IS A TITLE?A title is the compilation of a property's records, with which one can determine legal ownership and rights to use and sell the property —partial or complete.
A title must not be mistaken for the property's deed. The deed is a legal document whose purpose is to state who owns the property and does not hold further information that could point to the existence of a lien, easement, encumbrance, or doubt of ownership that can later be claimed by a third party against it. Only the title holds the necessary information to know if the property is free and clear to be sold.
ISSUING TITLE INSURANCETo mitigate risks, your title company will want to conduct a title search to ensure the seller has the right to truly and fully transfer the property and that it's free and clear to own. Your title company will perform the title search by doing as follows:
- Thoroughly researching public records to uncover possible errors, liens, or encumbrances.
- Verifying the property's boundaries, legal description, and searching for the existence of any easement given to neighbors, the city, or any third party by previous owners.
- Analyzing documents and conducting all necessary investigations to cast aside any possibility of fraud through forgery or impersonation or the existence of missing heirs.
If —or when— the title is clear of all defects, the title company will issue a title insurance policy to protect you or your lender from any undiscovered ownership issue that might arise in the future, as no title search is infallible.
TYPES OF TITLE INSURANCEAccording to Forbes, title insurance is a policy that covers third-party claims on a property that don't show up in the initial title search and arise after a real estate closing. It can be issued to protect the buyer or lender.
Owner's Title InsuranceOwner's title insurance policy protects the buyer. It generally covers the same amount paid to purchase the property, and the coverage remains constant as long as you —or your heirs— own the property.
It works by:
- Covering the costs of any lien undiscovered in the title search.
- Paying costs of legal disputes filed against you by anyone claiming a right to the property.
- Providing cash settlement in case you inadvertently bought a property from a fraudulent seller.
- Protecting your ability to sell the property one day if any issue should arise after the title search.
To be clear, Florida Title Insurance will not protect you against infringements on your property rights caused by your actions, such as failing to pay your property taxes, HOA bills, or a contractor you hired to work on your property. It also doesn't protect against eminent domain, which Investopedia defines as the power of the government, states, and municipalities to take private property for public use, following the payment of just compensation.
Lender's Title InsuranceThis type of title insurance policy protects your lender's financial interests. You will be required to purchase it if you want to take out a mortgage, whether you're buying or just refinancing your property.
It works by:
- Making sure your lender has the top claim on the property above any other debt.
Although lender's title insurance does not cover you as a homeowner, it does have its benefits.
If the property was sold to you fraudulently, you don't have to continue to pay your mortgage, as your lender will file a claim with the title insurance company to recoup further mortgage payments.
According to Forbes, under other circumstances where you stopped paying your mortgage, the lender could foreclose and recoup its losses from selling the home. But if it turns out that someone else has a right to the home, foreclosure isn't an option.
WHY CHOOSE KEY TITLE & ESCROW AS YOUR TITLE INSURANCE PROVIDER?When choosing a title company to insure your property's title, you will want to look for one who has the experience to detect even the smallest problem through the title search, but also the reputation to cover you if any issue should later pop up.
At Key Title & Escrow, we have served Florida's real estate industry for nearly 25 years, earning a solid reputation as one of the top and most reliable title and escrow companies. Plus, we offer various services, such as homeowners insurance, escrow, and state-wide notary services, that let us fully handle your closing from start to finish.
So if you found this article useful and are looking for a title and escrow company to insure your property's title or handle every step of the closing process for you, just give us a call at (305) 235-4571 or toll-free at (800) 547-0006. You can also fill out the Contact us form on this page and we will get back to you as soon as possible.