SECTION # 01 TITLE INSURANCE
What is TITLE INSURANCE?
It’s an insurance policy you buy from a title insurance company when you buy a home or property. It protects you and your lender from loss if a property ownership dispute occurs. The title insurance company searches public records, such as liens, claims, deeds, tax records and maps, to make sure there are no problems in the title’s ownership and history for the property you are buying.
The fee for title insurance is usually included in your itemization of closing costs from your lender, and it is a one-time fee. If a problem should occur at a later date, the terms of the policy define covered and excluded losses. The policy takes effect on the issue date and covers defects that arise prior to your ownership. By law, your lender must deliver your policy to you within a reasonable time after it is issued.
Why are title searches SO important?
The most important reason to conduct a title search is to eliminate risk to you and your lender of future title claims and loss against the home or property you are buying. If the title search uncovers problems, you can deal with it before you close on the home or property. The title insurer and the seller may obtain payoff releases, court orders, paid assessment letters or waivers to resolve most problems. But even the most careful preventive work cannot always locate hidden issues.
Title Insurance has
TWO DIFFERENT TYPES
Lender Insurance protects your lender against any loss that might occur due to unknown title defects. It also guarantees the lender to have a valid first lien against the property.
Owner Insurance protects you, the buyer, from issues that might emerge after you close the sale. Example of issues may include human error, forged documents, undisclosed or missing heirs, and incorrect legal descriptions.
Only an owner’s policy will protect you from personal loss, such as legal expenses for a dispute after the sale. There are no annual premiums with owner insurance.
You pay when the policy is issued. It insures you for as long as you own the property. This protection is limited to the face amount of the policy, which is usually the market value of the property when you buy it. It does not cover increases in the value of your property. If you want to cover the increased value of your property, you may buy additional coverage through your title insurer.
What Owner's Insurance
WILL & WILL NOT COVER
What does Owner’s Insurance Cover?
- You are the owner of the property
- You against losses from prior liens or judgments on the property
- You have legal access to your property
- Your title is not rejected by a subsequent buyer because it is unmarketable due to a title defect or lien
What does Owner’s Insurance Not Cover?
Title insurance does not protect you from losses caused by problems you created or losses not directly related to resolving or paying the claim. It also does not cover losses listed under your policy’s exclusions or exceptions. It is a good idea to discuss these exceptions with an attorney before you close any real estate purchase. Some non-covered sources of loss may include:
- An unrecorded title defect you knew about
- Violations of building and zoning ordinances
- Restrictive covenants limiting how you may use the property
- Discrepancies, conflicts or shortages in area, boundary lines, encroachments, protrusions or overlapping of improvements
Cost considerations of
Under Washington state law, every title insurer must file its rates schedule, forms, and rate modifications with the Office of the Insurance Commissioner (OIC). It’s a good idea to compare prices when shopping for title insurance. Each company’s loss experience, expenses, and rates will differ.
Some title insurance companies offer discounts for title insurance and escrow to first-time home buyers, senior citizens, certain professions, a “short-term rate” for properties resold within the last five years, and a subdivision bulk rate for homes purchased in a new subdivision.
Title companies may also offer a discount when you buy both a lender’s policy and an owner’s policy concurrently from the same company. The availability, amount, and applicability of the discounts vary by company. Discounts generally range from five to 30 percent of the standard rate. Be sure to ask your title or escrow agent what discounts are available.
Things to think about BEFORE you buy Title Insurance
- Make sure the face amount of the title policy is correct.
- Make sure the effective date on the policy matches the actual closing date of the escrow.
- Verify that the policy describes all of the property and all of the interests being acquired.
- Read your policy—know exactly what is covered and what is not. If you are unsure, ask questions.
- Make sure you keep your policy in a safe place.
How to make a CLAIM on your policy
First, only you, the policy owner, can make a claim on your policy. And second, the process to submit a claim is strictly governed by the terms of your policy. Usually, your policy will require you to promptly notify the insurer when you first become aware of a potential loss. You must then submit proof of loss or damage within a certain time frame.
The title insurer may defend the title and pay the associated legal expenses, take corrective action to resolve the problem, or pay you for your loss up to the face amount of the policy. The insurer is only obligated to pay you if it cannot correct the defect causing the loss.