It is essential to understand some of the vital aspects of title insurance. It is one of the latest products in Canada and the U.S and has come with a lot of positivity. Title insurance is an agreement used to compensate for damage or loss of property such as titles among other valuables. Title insurance helps to protect against mistakes on public records or missing heirs.
The lenders’ title insurance is one of the most common types of title insurance. In this insurance, the buyer purchases it to take the cover of the lender. The seller obtains the owner’s title insurance to cover the buyer.
For a real transaction to be considered accurate, it is essential that it gets a clear title. Before issuing titles, title companies should do a top search to ensure there are no claims are on either of the titles. A title search is defined as examining public records to ensure that the property being purchased is legally owned and confirm that there are no legal claims attached to it. It helps to ensure that a title will have no blemishes or violations.
Title insurance acts as a protection to both lenders and real estate owners. It helps in solving past claims, not like the traditional insurance that just catered for potential occurrences. It helps in eliminating any defects in an existing title or property. The following are some of the risks Title Insurance covers.
1. Incorrect signatures, forgery, and fraud on title documents
2. Improper record keeping
3. Eliminating terms that may lead to a reduction of value
4. Ownership by another party.
A warranty of title for a number of private transactions is involved instead of title insurance. It acts as an assurance to the buyer that the seller legally owns the property, thus can transfer the ownership without interference.
Once the purchase contract is completed, a closing agent initiates the insurance process. Owner’s title insurance costs 1% of the price of the purchased property. The cost, however, varies according to the country one is in. An attorney can recommend to you around five title insurance underwriters where he will help you choose one that fits your specifications.
There are two major types of Title Insurance. These are Owners’ insurance and Lenders’ insurance. In cases where the lender is unable to transfer the ownership of title rights to the buyer legally, a buyer is recommended to purchase Lenders title insurance. The lenders’ policy will only cover the lender in the occurrence of loss. When the policy is issued, the buyer gets some assurance on the ownership of the property. Owners Title Insurance is optional and commonly purchased by sellers to cover the buyer against possible mistakes in the title. However, it is vital to have both titles to ensure protection for both the lender and the buyer.
Title Insurance plays a significant role in case of defects in a title. It helps to protect both transacting parties from risks that may occur from the errors. The buyer benefits a great deal in case they purchase a product, and after completing the transactions, they find that the product was illegally transacted. Banks also benefit from title insurance in cases of wrong recordings or defaults by a borrower. Lenders title insurance will help in covering up most losses.