Title Insurance Facts
Title insurance provides the property buyer and/or the mortgage lender protection against losses resulting from unknown defects in the title to a property that occur prior to the closing of a real estate transaction. Unknown defects in a title, such as any outstanding liens or encumbrances, can result in additional costs in the future or even invalidate a buyer’s right of ownership in the property, and might also invalidate the lender’s security interest in the policy. Title insurance policies will cover the insured party for any covered losses and legal fees that might arise out of such problems.
Nearly all lenders require that property buyers purchase the lender’s title insurance policy for an amount equal to the loan. The lender’s policy will remain in effect until the amount financed has been repaid, the property is resold, or until refinancing has occurred. The lender’s policy only covers the lender’s loss and does not protect the buyer from losses arising from defects in title.
An owner’s policy may be purchased by either the seller or the buyer. The policy is issued to the buyer and remains in effect as long as the buyer owns or maintains an ownership interest in the insured property.
A title policy is usually paid for with a one-time premium that is handled at the closing of the real estate transaction. Premium discounts might be available if both owner’s and lender’s policies are purchased from the same title insurance company.
Source: National Association of Insurance Commissioners
