Title Insurance FAQ
Title insurance is different from most types of insurance
Unlike property and casualty insurance that assume risk of future incidents, the bulk of premiums written for title insurance go toward paid losses (claims) for past incidents, as well as loss prevention: searching, identifying and eliminating risks that could yield a title claim.
Title insurance FAQ
It’s possible that someone else may have a legal claim to your property due to issues like prior liens, undisclosed heirs, or clerical errors in public records. If such a claim arises, a title insurance policy protects you by covering legal costs and any financial loss, up to the policy limits. The premium you paid for your title insurance policy ensures that your ownership is defended, including legal representation, if necessary.
- The seller has the legal right to transfer ownership of the property to you.
- Any known liens, claims, or defects are disclosed, and exceptions are made clear before you complete the purchase.
- You and your lender are protected against claims of fraud and forgery in the chain of title, and issues like undisclosed heirs or unpaid taxes.
- Easements, rights-of-way, and other legal rights that affect the property are disclosed to you prior to closing.
- The funds entrusted to agents are properly distributed pursuant to closing instructions.
- If an undetected defect arises after the transaction, the policy covers legal representation and financial losses, up to the policy limits, at no additional cost to you.
Title insurance protects your ownership rights to your property with a one-time fee, offering coverage for as long as you own the home—no ongoing payments required. Your title insurance agent performs a thorough search of public records to identify any potential issues, such as liens or claims, and works to resolve them or make you aware of exceptions before closing. This coverage protects both you and your lender from future claims, and if an issue arises later, the title insurance underwriter, like Alliant National, will step in to provide legal defense and financial protection, up to the policy limits.
Yes, and it’s a smart move to do your research and choose a reputable, competitively priced title services provider. While many buyers rely on recommendations from their real estate agent, lender, or attorney, you have the right to select the title company that works best for you. One key benefit of working with a local, independent title agent is their deep knowledge of your community. They understand local laws, property issues, and market conditions. By choosing a local title agent, you're not only getting personalized service but also supporting professionals who are invested in your community.
The legal requirement for title insurance varies by state. However, if you’re taking out a mortgage, your lender will most likely require a lender’s title insurance policy to protect their investment in the property. It’s important to note that this policy only protects the lender and does not cover you as the homeowner.
Owner’s title insurance is the only way to protect your ownership rights and financial interest in the property. Even if a lender’s policy is in place, owner’s title insurance ensures that you are covered in case of future claims or defects that could affect your ownership.
Your title agent performs several important tasks to ensure a smooth real estate transaction and protect your interests, including:
- Conducting a search of public records to identify and help resolve certain title defects before closing.
- Issuing a title commitment, which outlines the proposed title insurance policy.
- Issue a title commitment – description of proposed policy.
- Acting as an independent central clearinghouse—gathering necessary documents, following lender instructions, and ensuring proper payment and distribution of funds.
- Preparing your Closing Disclosure, which details the financial terms of the transaction.
- Coordinating and managing the closing of your real estate transaction.
- Recording legal documents with the appropriate county office.
- Issuing your final title insurance policy.
Your title agent conducts a thorough search of public records and title plants to uncover any potential issues with the property’s ownership. This includes identifying judgments, liens, unpaid taxes, or other problems, such as forgery or clerical errors in past title transfers.
The goal is to address these issues before closing, reducing your risk and ensuring a smooth transaction. Without this research, unresolved title issues could jeopardize your ownership rights or complicate the future sale of the property.
Even with a thorough title search, some issues may remain hidden. Title insurance protects you against these potential problems that could arise after the transaction:
- False impersonation of the seller.
- Forged documents, such as deeds or releases.
- Documents signed under false or expired power of attorney.
- Falsified public records.
- Errors in recording legal documents.
- Errors in certain legal proceedings.
- Mistakes in tax records that show payments for the wrong property.
- Claims by creditors against property inherited by heirs.
- Undisclosed or missing heirs.
- And many more.
- Loan policies protect the lender. Most lenders require you to purchase this policy as a condition for issuing a mortgage. It ensures the lender will be repaid if a title issue invalidates your ownership or reduces the value of the property.
- Owner’s policies protect you, the buyer. This policy provides coverage for any losses you might face due to title defects or claims after purchasing the property, and it remains in effect for as long as you own the property.
Additionally, you can opt for an Enhanced Owner’s Policy, which provides broader protection for an additional fee. An enhanced policy adds coverage for certain risks that may not be covered by a standard policy, such as:
- Inflation coverage
- Coverage for building permit violations by previous owners
- Protection against violations of Covenants, Conditions, and Restrictions (CC&Rs)
- Encroachment issues
- Enhanced access protection
- And more.
Title insurance policies cover events and issues that occurred before the policy date, but they do not protect against events that happen afterward. For example, if a lien is placed on your property after your original policy was issued—such as from unpaid taxes, a contractor, or an HOA—you wouldn’t be covered.
When you refinance your mortgage, your lender requires a new title insurance policy to ensure that the title remains clear of any new defects or claims. The new loan policy protects the lender from any risks associated with the new mortgage, including the validity and priority of the new lien, which isn’t covered by your existing owner’s title policy or any previous loan policy.
Yes, title insurance is regulated, but the extent and specifics of regulation vary from state to state. In some states, the premium includes the costs of the title search, examination, and policy issuance; while in others, the premium covers only the insurance itself, with separate fees for the title search and examination.
Additionally, services like escrow handling or closing the transaction are usually charged separately. These services may be provided by the title agent, an escrow agent, or an attorney, depending on the state's regulations.
Title insurance rates vary by state. In some states, like Texas and Florida, rates are set by regulatory authorities. In other states, such as Colorado, title insurance underwriters set the rates, which are then reviewed by state regulators under a “file and use” system.
Generally, states require that rates be fair to consumers while ensuring they are not too low to jeopardize the viability of the title insurance industry.
