Introduction
From a historical point of view, record keeping for land titles has not always been entirely perfect, which leaves land owners with the risk of potential disputes as a result of such errors. As a result, insurance companies developed a policy to protect the rights of land owners and mortgage lenders in the event of a dispute, known as title insurance. Even though recent laws have established better practices for tracking title information, some disputes can go back for decades. It is therefore advisable to apply for title insurance, to ensure your legal defense is covered in the event of a dispute.
History
Most property owners will have bought the land from another person. If those owners used forged documents to prove their ownership of the land, and the sold the property to you illegally, the real owner of the land could show up at any moment to claim their rights for the property. If it is also discovered that property taxes were never paid on that property, you may be found liable for those back taxes. This is where title insurance can prove to be handy, by ensuring that you are well protected from those types of scenarios. Additionally, most mortgage companies will require borrowers to apply for this type of insurance policy, in order to qualify for a loan. The amount of insurance your buy should able to carry the entire amount of the loan for the whole mortgage period.
Features
Before applying for a title insurance policy, you should first consider performing title search on the land you would like to buy. A title search will crosscheck public records to look up the history of the property’s ownership. You can perform a title search on your own, however most lenders will require that you perform a title search through a qualified expert. The title search will be able to reveal any limitations there may be on the use of the land, the rights other individuals may have n the property, as well as liens or monetary obligations that may be outstanding against the property. Unlike regular insurance which is meant to cover events that are yet to happen, this type of insurance covers events related to the title that have already happened. It will not cover events that happen to the title after the issuance of the policy. For instance, if there any liens filed against the property for taxes that you neglected to pay, your title insurance policy will not bail you out. On the other hand, if there are liens for property taxes that were unsettled by the previous owner of the property, then your title coverage should be able to handle the expense.
Tips and comments
Before an insurance company can provide you with a title insurance policy, they will first perform a title search to discover if there are any hidden problems or limitations with the title. If they do discover any problems, they will often be listed as exceptions in your policy coverage. At which point you can decide whether to go ahead with the property purchase or not.
