What is Title Insurance and why do I need it?
Title insurance is commonly confused with homeowners insurance. There are two types of title insurance, lender’s coverage and owner·s coverage.
The most commonly issued policy is lender’s title insurance. A lender’s title insurance policy is required by most lenders when refinancing or purchasing a home with a mortgage. The lender’s policy guarantees the lender to be in first/best lien position on the title to the real estate. Should the lender’s mortgage go into default for any reason and the bank would have to sell the home, the lender’s policy protects the lender against any additional liens filed against the property effecting the lien position of the lender. Therefore, if the lender is forced to sell the home, they will receive the proceeds from the sale to pay off the mortgage in default. A common question, which arises with lender’s policies, is ‘Why do I have to buy a new lender’s title insurance policy when I refinance my home?’ your original mortgage title insurance policy only provides coverage for the lender providing that mortgage. Upon payment in full of the insured mortgage, the policy becomes null and void and the coverage no longer exists.
An owner’s title insurance policy insures the owner of the real estate. An owner’s policy protects the owner of a home against defects in the chain of title to the property such as false impersonation, forged deeds, deeds by minors or persons of unsound mind, invalid documents executed by power of attorneys, invalid deeds delivered after death of the grantor, deeds by supposedly single persons but actually married, unrecorded easements, undisclosed heirs, or a myriad of different situations that may arise in the examination of the chain of title to the real estate. For a one-time low premium, you receive the protection of an owner’s title insurance policy against items such as the ‘hidden risks’ mentioned above. Another benefit of an owner’s title insurance policy is savings off the purchase of your next lender’s title insurance policy should you refinance your mortgage. An owner’s policy gives you the benefit of approximately 30% savings (known as reissue rate) off your next lender’s title insurance policy. Your owner’s policy gives you this 30% discount for 10 years after the issuance of the owner’s policy.
|Chicago Title Insurance 1360 East Ninth St
Cleveland, OH 44114
|First American Title Insurance Company1 First American Way
Santa Ana, California 92707