Title Insurance
What is title insurance?
It is the application of the principles of insurance to risks/hazards that exist in every real estate transaction.
How does title insurance differ from other types of insurance?
Title insurance protects the insured from future losses arising out of events that happened in the past.
Are there several types of title insurance?
Yes. There are three types of title policies. The first one is the owner's policy, which the buyer would need for his or her protection. The second one is the lender's policy (mortgagee's policy), which only protects the lender. A majority of the lending institutions require a lender's policy for each real estate loan. Additional coverage is available through an “Eagle” policy.
How much are the annual premiums?
There are no annual premiums. The premium is calculated based on the sales price or the mortgage amount, and it is a one-time charge for the life of the policy.
What fees are associated with title insurance, and who is responsible for paying these?
There are four steps necessary to get to the point of issuing a title policy (whether owner's, lender's or leasehold). The four steps are as follows:
- Initial abstracting to update abstract for title examination;
- Title examination by an attorney to produce a title commitment;
- Final search to show recorded documents (from closing) in abstract;
- Collection of title insurance premium.
Each of the first three above-referenced steps has a fee associated with it, and the party who pays for each of these is determined by the real estate contract.