FAQ

Frequently Asked Questions


What is Title Insurance?

Title insurance protects you against covered title defects, like a previous owner’s debt, liens, and other claims of ownership that may have been instituted prior to purchasing your home.

 

How is it different than traditional insurance policies?

Title insurance protects against past problems, whereas other insurances, like property and casualty, deal with future risk. You also pay for an owner’s policy of title insurance once; there are no ongoing premiums.

 

What types of policies?

Loan Policy- This policy is required by a mortgage lender to protect against title defects that could affect the lien of the lender’s mortgage.

Owner’s Policy- A separate policy that helps protect you against title defects that could affect your ownership rights.

 

How long does the policy last?

Loan Policy- Effective for the life of the loan.

Owner’s Policy- Lasts as long as you or your heirs retain an interest in the property or remain liable for any warranties.

 

What does it cost?

The average cost of a loan policy is $3.50 per $1,000. The average cost of owner’s policy is $2.50 per $1000 of the purchase price. However, the price can vary depending on property value and location, along with state regulations. If you would like to get an estimate on how much your closing costs would be, check out this closing cost calculator.

87% of purchase transactions include both a lender and an owner’s policy in 2013. 

 

What are the most common title claims?

Liens- Typically relate to the priority of a mortgage lien in relation to other such liens on the property and other types of liens attached to the property such as state or federal tax liens or other court judgments.

Basic Risks- Fraud, forgery, undisclosed heirs marital rights, recorded notices of zoning violations or building permit violations, and improper legal description of property.

Encumbrances- Defects in insured title otherwise not expected in the policy, such as missing interests, easements, or other recorded rights.

Escrow and Closing Errors- Problems due to improper execution of closing documents, improper recordings, and certain agent defalcations.

75% to 85% of claims are made within the fist 6 years of the life of the policy.

 

What it the Title Insurance Process?

First, a search of public records helps title professionals find possible title defects (also called clouds) and associated risks. On average, a title policy order closes approximately 55 to 70 days after the order is opened. We search county, state and federal records, along with court records. Afterward, we examine and identify title defects, issues with the preliminary title report/ title commitment, and identify curative actions.

Title Defects are found in 25% of real estate transactions. An in-depth title search can uncover many unknown title clouds, including liens, unpaid debts, easements, assessments, judgments, land encroachments, taxes and levies. After you settle existing liens and resolve title issues you go to close. At closing the title policy is issued, funds are dispersed, and the ownership is transferred.

 


Sources:

tdi.texas.gov/pubs/consumer/cbo58.html

alta.org/about/titleinsuranceoverview.pdf

bankrate.com/finance/insurance/4-ways-to-sace-on-title-insurance-1.aspx

trulia.com/voices/home_buying/now_the_next_question_homw_long_does_the_average_-340477

escrowhelp.com/qanda-3.html

realtor.com/home-finance/refinance/title-insurance-savings.aspx

firstam.com