September 4th, 2012
In the market to buy a house? You may want to do some research on title insurance before you buy. It's mandatory to obtain if you are getting a mortgage. This is because most mortgage lending companies require it for the amount equal to the loan.
So what exactly is this mandatory insurance?
Before you buy a home remember that house may have gone through a number of previous owners. Think about the land that the house is built on as well; its almost certainly had even more owners in the past than the actual house. And somewhere along the line something could have gone wrong. That could mean a forged a signature, unpaid estate taxes or other liens -- and if those problems happen to come up while you are the owner, you could have to deal with them yourself.
That's where title insurance comes in. Title insurance covers the insured for any claims and legal fees that arise out of such problems. There are actually two types of title insurance. The first is the basic, which is the lender's title policy. This is what you are getting when you buy title insurance with your mortgage. It only covers the lender's losses. If you want to protect your equity too you will have to obtain an owner's title policy. With the owner's policy, the full value of the home is insured. This is usually considered an add-on to your current policy.
Title insurance is not like other insurance policies. Coverage actually ends on the day the policy is issued and extends backwards in time. Its insurance to protect you from the past, after all. However, the owner of the property is protected indefinitely. That means that it remains in effect as long as the owner or the owner's heirs have an interest in the property. Once it is sold again the new owner will have to get a new title insurance policy.
Overall title insurance does not seem like a bad idea at all. However, it's probably a good idea to ask around for rates; they tend to vary by state and by county.