Would you like an insurance policy that you only pay a premium on once and it covers the commodity for the entire time that you own it?
Even better, wouldn’t you like it if someone else paid for the insurance policy?
If you own a home or property, you probably have such a policy: It’s called a title insurance policy, which is usually paid for by the seller of a property on behalf of the buyer.
Many take this part of a real estate transaction for granted until the time comes when the coverage is needed.
Title insurance is predominately written on property within the United States although you may find it in other countries. The first title policy was issued in the mid-1850s in Pennsylvania.
Prior to the advent of title insurance, the buyers in a real estate transaction were responsible for determining if the seller had valid ownership of the property.
If the title was fraudulent, the unfortunate buyer lost his investment. A title insurance policy protects against defects found in the title to a property.
Before a policy is issued, a search of public records is made to find potential problems so they may be corrected before the transfer of property.
Most title defects can be found by skilled title officers, however, there is the possibility of hidden defects that a search may not reveal. For example, it could be something as simple as a document that was not properly signed to something as major as forced removal of a residential structure because it extends onto another person’s land.
As with most insurance policies, there are different levels of coverage depending on the type of policy that is purchased.
The residential purchase contract used by most realtors calls for the American Land Title Association Homeowner’s policy which offers the highest level of coverage offered and provides the most protection for the buyer.
A title policy for land is normally a standard policy unless a higher level of coverage is desired.
When buying a home with a mortgage, lenders will require an additional title policy that is paid for by the buyer. This is a “lender’s policy” which protects the lender in the event of a title defect.
While the number of title claims is relatively small, it would be foolhardy not to protect one of life’s biggest investments for the relatively small cost of a title insurance policy.
Ray Pugel is a designated broker with Coldwell Banker Bishop Realty. Contact him at (928) 474-2216.