Is title insurance a new concept for you? Here you will find out all you need to know about the purpose of title insurance.
- What’s the purpose of title insurance?
Title insurance protects against financial loss due to defects that may be found in a property title, and can be used to prove the lawful ownership of a piece of property. More than half of all real estate transactions run into trouble someplace within the chain of title, and title insurance can be useful in helping uncover any issues prior to making a property purchase, which will allow you to correct any problems so that the transaction can be completed. Property loss or damage may occur due to liens, encumbrances or defects in the title to the property, and title insurance shields real estate owners and lenders against such problems. Every title insurance policy contains specific conditions, terms and exclusions.
- Protecting your investment
For most people, their home is the largest investment they make, and title insurance can help to safeguard it. Most types of insurance (like auto, flood or homeowners insurance) supply coverage for events that might be happen in the future; however, title insurance defends against losses that may come from defects and hazards that a property title already has. Documents from a previous sale that have been improperly executed or a lien against a previous owner are some examples of these issues.
- Checking for past liens
Insurance policies including healthcare, life protection, etc. protect you in the event that something happens in the future, and you pay for them with premiums broken down by the month or year. On the other hand, title insurance protects against previous events that happened with the real estate property and its former owners, and is paid in a one-time lump sum at the close of escrow.
- Benefits buyers, sellers and lenders
Claims from defects is something title insurance protects against. Defects including improperly recorded documents, fraud, forgery, liens, encroachments, easements, another person claiming an ownership interest and other items are defined in each insurance policy. So that they can be insured against assorted possible title defects, purchasers and lenders need title insurance. When title insurance is issued, it benefits the buyer, seller and lender.
- Title agents
Once the title order has been opened by the escrow officer or lender, a title search can be conducted by the title agent or attorney. The customer will be sent a preliminary report to review and approve. Upon the instruction of escrow, all closing documents are recorded. After recording has been confirmed, orders are paid, funds are expended and the title insurance policy is produced.
Escrow is a process that happens when the money for a transaction (like when a house is being sold) is kept by a third party (often a title company or an attorney when it comes to real estate dealings) until the conditions of the transaction have been fulfilled.
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