What is Title Insurance?

When you purchase a home with a mortgage, the lender’s attorney will almost always ask whether you want to purchase title insurance on your new home. While asking if someone wants to purchase title insurance is common, not everyone truly understands exactly what title insurance does. So, let me help you answer the most basic question, what is title insurance?

If you receive a mortgage through a bank, then the bank will most likely be getting a mortgagee title insurance policy. And the buyer of the property pays the bank’s one-time title insurance premium. The mortgagee title insurance policy protects lenders from any liens or other irregularities in the history of your title that may have adverse financial consequences in the future. However, the mortgagee title insurance policy only protects the bank or lender, it does not offer the buyer any protection.

The owner title insurance policy protects the buyer against loss from title irregularities. The policy is paid through a one-time premium payment due at closing of the purchase transaction. Title insurance insures the buyer against loss resulting from matters affecting the title to real property. Title insurance companies evaluate the history of the property and insure that nothing in the history of the title will result in a loss to the insured.

The owner title insurance policy insures the entire value of the property. The policy stays in effect for as long as the buyer maintains an interest in the property. If someone claiming to have an interest in the property were to take legal action against the buyer, the owner title insurance policy would work to resolve the defect in title and protect the buyer’s interests and financial position in the event the matter did go to court. Upon a subsequent sale of the property, the owner title insurance policy would cover the original owner if the new buyer makes a claim for improper or bad title.

The owner title insurance policy specifically insures the following:

1. You are the true, legally recognized owner of the property;

2. There are no defects, liens, or encumbrances other than those that have been identified and listed in the title insurance policy;

3. You can sell your home to another buyer without being rejected because of a defect in the title you were unaware of when you purchased the policy;

4. You have a legal right to access your property from a public street;

5. If your title is challenged, the insurer may defend your title. And costs, attorney’s fees, and expenses associated with that defense will be covered by the insurer;

6. The dollar amount of your coverage will automatically increase 10% each year for the first five years of its life-without any additional cost to you.

An expanded owner title insurance policy will also cover the following:

1. Anyone makes an ownership claim based upon a forged deed after you buy the property;

2.  Someone else claims they have a right to your land, or can limit the way you use it, after you buy the property;

3. You cannot use your house a single-family residence;

4. You do not have actual pedestrian and vehicular access to your property;

5. Someone claims they own your land as a result of a violation of a recorded covenant or restriction that occurs before you acquire the property;

6. You are prevented from obtaining a building permit to build an addition because of an existing violation of a subdivision law, or you are ordered to correct the violation;

7. You are forced to remove a structure presently on your property because of an existing zoning violation, or you are ordered to correct the violation;

8. You are forced to remove or remodel the existing home or another building on your land, because any portion of it was built without obtaining a necessary building permit;

9. You are forced to remove an existing structure on your property because that structure encroaches onto your neighbor’s land, into an easement or across a building set back line;

10. Your home is damaged by someone utilizing an easement;

11. After you buy the property, your neighbor builds a house or some other building that encroaches onto your land;

12. You cannot see your home because of an existing violation of a subdivision law

Owner’s title insurance has many benefits. Lake Shore Legal can assist you through the entire purchase transaction from negotiating the offer to purchase, drafting the purchase and sale agreement, offering title insurance, and working with the seller’s attorney. Lake Shore Legal will make this monumental part of your life move smoothly. Give us a call today (508) 943-7800, or contact us at info@lakeshorelegalsolutions.com.

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