Among the most misunderstood aspects of real estate transactions are questions regarding title insurance and what it covers. Let’s examine what title insurance is, what it covers – and what it doesn’t cover – and why it’s necessary to protect your largest investment.
What is the definition of title insurance?
Title insurance safeguards real estate owners and lenders against property loss or damage resulting from title defects. Unlike other types of insurance, title insurance focuses on risk prevention rather than risk assumption. In the same way that a homeowner’s policy protects against theft, fire, and wind damage, home title insurance safeguards the owner’s financial investment against hidden title risks.
When a property is financed, purchased, or sold, a record of the transaction is typically filed in public archives alongside other events that may affect the property’s ownership, such as liens and levies. Despite the fact that a title search performs due diligence during any real estate transaction, mistakes and omissions are possible.
Title insurance protects you against these unforeseen legal and financial title discrepancies, as well as the costs, attorney’s fees, and expenses associated with defending against the policy’s covered defects. Similarly, title insurance can protect you against financial loss if the sale of your home falls through due to a covered title defect.
What is covered by title insurance?
The home title insurance policy safeguards the buyer’s ownership rights for as long as they or their heirs retain an interest in the property. A title search is performed as part of a property transaction’s due diligence, but mistakes and omissions are possible. Typically, a home or piece of land has been owned by multiple people for at least a century. Title insurance protects against possible errors, future claims, and unknown interests.
Likewise, when it comes to the construction of a new home, there is the possibility of encountering unique pitfalls. There have probably been numerous owners of the undeveloped land over the years who may seek to assert ownership. During the construction of your home, it is also possible that the builder failed to pay subcontractors or suppliers, which could result in a lien being placed on the property.
There are numerous errors and title defects that can be covered by title insurance, but the following are the most prevalent:
• Improper document execution • Errors in recording or indexing legal documents • Forgeries and fraud • Unknown or missing heirs • Unpaid taxes and assessments • Unpaid judgments and liens • outstanding mortgages
What is excluded from title insurance?
As with any insurance policy, your policy may not cover all possible risks. For instance, this type of insurance does not cover anything discovered during a property inspection.
Additionally, title insurance does not cover any title issues that you are already aware of, nor does it cover the condition of the home, such as the discovery of termites, radon, or mold, or anything that happens to the title of the home after the closing date.
Why title insurance is necessary for your property
Protecting your home’s title is crucial. Without a robust Minnesota title insurance policy issued by a reputable title company, you could lose your home if someone files a claim of ownership years after closing. Frequently, a title company will issue title insurance policies on behalf of a title insurance company as an independent agent. The risk of loss under the policy is borne by the underwriting company, which receives the actual insurance premium.
Cities Title Services is distinguished by its innovative approach, cutting-edge technology, laid-back culture, and exceptional customer service. Contact us immediately for your title-related needs.