What Is Title Insurance and What Is Its Importance?by Ethat T. Contributor
Buying a property can be a cumbersome job as you not only need to invest time and energy in finding the right property for you but also look into the financial aspect of it. There are several risks associated with buying a property, and a title insurance policy is the best way to cover yourself for the risks.
What is title insurance?
Certain defects are hard to find and remain hidden despite a thorough search. Title insurance is an insurance policy that protects you the holder of the policy from any financial loss that can be incurred due to defects in the title of the property bought. It is a one-time premium paid for reimbursement of losses suffered due to undetected risks or liabilities in the title. It can be claimed by filing against a title with defects.
Why is title insurance important?
A deed, document, or record submitted by the seller may be defective, which may lead to a huge loss to the buyer. Title insurance protects you from potential risks while buying a property. A lot of defects are covered by the title insurance, and you can also buy additional coverage if a risk is suspected.
Some of the potential risks or defects that can be covered by title insurance include the following –
- Forged documents such as mortgages, deeds, releases, or satisfaction.
- Deed by a mentally incompetent person.
- Deed by person in a foreign country that can be deemed unauthorized, incompetent, or defective.
- A deed that is challenged as being given under undue interest, duress, or fraud.
- A deed that is signed by mistake.
- A deed that is executed under a forged power of attorney.
- A deed that does not disclose all heirs of a diseased person.
- A deed that is recorded but not indexed properly, which results in a failure to locate the land records.
- Divorce that is undisclosed by the seller who claims to be the sole heir of a departed or deceased former spouse.
- Recorded state or federal tax lien that is not disclosed.
- Recorded spousal or child support lien that is not disclosed.
- Recorded prior mortgage on the property that is not disclosed.
- Recorded party wall, boundary, or setback agreements that are not disclosed.
- Deeds, wills, and other instruments that are misinterpreted.
- The discovery of a later will after the first will is executed.
- The insufficient or erroneous legal description provided in legal property documents.
- The deed to a property without the right of access to a proper public road or street.
- Forged witness acknowledgment or notarization.
- Inappropriately recorded deed such as missing pages or content, wrong county, or recorded without the required payment.
- Deed offered to the buyer by a seller who has previously leased or sold the same property to another party under an unrecorded contract, and that party has possession of the property.
Two types of title insurance can be bought. The property owner can buy title insurance to protect their investment in the property, and the lender can elect to buy one to secure their interest in the property. Though an extensive title search reduces the risks associated with the defects, it is ideal to buy title insurance as it can protect you against title defects.
Created on Apr 27th 2020 02:14. Viewed 100 times.