Emerald Bay Escrow Services

WHAT IS TITLE INSURANCE?

There are two types of title insurance. Lenders' title insurance is required by virtually all lenders to assure them that should a title defect arise, their investment in the subject property is protected. Lenders require the Borrowers to pay for lender coverage as a condition of obtaining a loan.

Owners title insurance protects the purchaser from any title claims arising from the previous ownership. The owner is protected from such problems as fraud, forgery and filing errors.

WHY DO I NEED TITLE INSURANCE?

A title search is performed on each transaction. The title records are only as good as the documents recorded. If a previous owner perpetrated a fraud, committed a forgery or the clerk of the land records failed to record or recorded incorrectly, the purchaser is unprotected without owners title insurance. With the coverage, the title insurance company incurs the expense of determining the validity of a claim and defending against the claim. If there is a title defect, the title insurance company pays the claim so that the purchaser retains ownership without loss, or compensates the owner for any and all losses incurred as a result . The cost of the owner's title insurance premium is modest in comparison with the potential loss from a claim. Owners title insurance is a one-time premium.

WHAT DOES A TITLE COMPANY DO?

A title company oversees the interests of all parties, consisting of buyers, sellers, lenders, real estate agents and coordinates the transfer of money and property at the time of closing. Prior to settlement the title company will research the ownership history of the property (which is called the title examination) to determine that the title is free of any liens or claims. At the settlement table, the title company collects and distributes funds from the transaction, transfers ownership of the property, and issues title insurance.

WHAT IS TITLE INSURANCE AND WHY DO I NEED IT?

The title insurance protects you, the property owner, and the lending institution that holds your mortgage from unforeseen claims that may arise against your property. The policy provides protection from financial loss and payment of legal costs associated with such claims.

IS A TITLE EXAM SUFFICIENT WITHOUT THE NEED FOR TITLE INSURANCE?

No. A title examination is only as good as the land records. Should a filing error happen, if someone perpetrates a fraud, if an estate is mishandled. The title insurance protects you, even thought the title examination did not and could not disclose the problem.

DO TITLE COMPANIES CHARGE DIFFERENT RATES FOR TITLE INSURANCES?

Title Insurance rates are set by state insurance commissions and are based on the purchase price of your property (owner's policy) and the loan amount (lender's policy).

AM I REQUIRED TO PURCHASE TITLE INSURANCE?

Most lenders will require that you purchase a lender's title Insurance policy. This protects their investments in your property. You are not required to purchase an owner's policy; however, your one-time payment will protect your property for as long as you own it.

ISN'T ALL INSURANCE BASICALLY THE SAME? 

To the extent that buying insurance protects you from the costs of unforeseen events and losses, yes, insurance is insurance. You buy homeowner's insurance in case a burglar breaks into your house, auto insurance to cover repairs after an accident, and life insurance to pay for your child's education if you are not there. These are all varieties of casualty insurance.

Land title insurance protects you, too, but it covers a different kind of loss, and its one- time premium pays for much more than simple risk protection. In short, not all insurance is the same.

WHAT DOES TITLE INSURANCE COVER? 

Land title insurance protects you from events which may have happened in the past, not events that are likely to occur in the future, as does casualty coverage like automobile, fire, and flood insurance. Title insurance charges are based on a cost - per - $1000 of the property to protect the homeowner from claims which could jeopardize all or part of his property.

Some common losses? Records misplaced in courthouses, boundary disputes, unpaid taxes, and hidden defects in the title like missing heirs, forgery, fraud and other items which do not show up in the most exhaustive title search.

 

WHAT ABOUT THE PREMIUM? 

One of the most common ways to arrive at insurance premiums is to forecast likely losses and add administrative expenses and profit. It is not unusual for 90% of the premium amount to be paid out for claims.

In the title insurance business, on the other hand, we may pay out only 8% to 15% of the fee for claims, and people often assume that the rest is profit. But only a small part of the one-time fee paid at settlement is for insurance; the remainder is the cost of conducting the many different searches required to show a clear title to the property.

 

WHAT's THE ALL-INCLUSIVE RATE?

In Pennsylvania we have an all - inclusive rate for title insurance. It bundles together the insurance premium, the cost of executing the title search, and the settlement fee.

While the convenience of paying a one- time fee at settlement and incorporating the charges for the search with the insurance premium is obvious, some people look at the amount (approximately 1% of the sales price) and think the charge is steep from an industry which only experiences modest rates of losses compared to casualty insurers.
When you consider, however that the one-time fee covers:

*the property for as long as the owner and his heirs own it,
*all title searching and examination, even multiple searches, and
*the costs of settlement

it becomes clear that land title insurance premiums buy you a good deal more than do casualty - type premiums. Although the land title insurance industry certainly offers insurance protection, comparing casualty and land title insurance rates is like comparing apples and oranges. The protection you get from land title insurance is unique.

 

AM I PROTECTED?

Even the most intensive search cannot avoid claims.

Suppose there are back taxes owed on a property. We go into the local courthouse, review the tax files, and find no evidence of these back taxes because a file is missing. We then insure the property and the tax claim pops up. We pay 100% of that claim.

Without title insurance, the owner must pay claims like these. Liens, unpaid taxes, and sewer and water are assessments are attached to the property - not to the person incurring the delinquency. If a previous owner had a judgment against his property, the new owner is responsible for payment. We insure against these circumstances.

If you have questions about title insurance please feel free to e-mail them to spokov@embescrow.com.