Introduction to Title Insurance
What is title insurance? Many homebuyers are not familiar with title insurance, even if they’ve purchased property before. This may be due to the fact that the closing process is full of requirements, tasks, and costs, and title insurance can sometimes get lost amid all those moving parts.
Title insurance is a type of insurance that protects homebuyers from costs associated with title defects. A licensed title agent facilitates the process of obtaining title insurance. A title search and municipal lien search must first be conducted to examine the title and determine if there are any defects that must be cleared prior to the policy being issued.
There are two broad categories of title insurance – an owner’s policy and a lender’s policy. Owner’s title insurance is intended to protect the new homeowner from issues with the title, and it is not a requirement for property purchases in Florida. A lender’s policy provides protection for the mortgage lender if a title defect is discovered. This type of title insurance is almost always required if you obtain a mortgage loan to purchase a property.
An owner’s title insurance policy that is issued at the same time as a loan policy is only a minimal cost because of the simultaneous issue discount that Florida and many other states offer. The State of Florida sets title insurance premiums based on a formula created by the State.
The Benefits of Title Insurance
There are numerous types of title defects that title insurance protects from, and they can range in severity. Some common examples include:
- Clerical errors (misfiled documents);
- Fraud and forged documents;
- Outstanding liens and violations;
- Missing heirs;
- Missed mortgages;
- Unrecorded powers of attorney; and
- Unpaid judgments.
While some of these issues may be easily rectified, others are much more difficult to address. Title defects can be serious enough that a property owner is forced to vacate their new home. Title insurance provides some financial security and peace of mind in the event a situation like this arises.
Title insurance works differently from the traditional insurance model most people are accustomed to. There are no monthly payments associated with this type of insurance; new homeowners pay a one-time fee at the time of closing. Therefore, obtaining this protection for your new home is cost-effective and does not require an ongoing commitment.
Not only does the insurance protect you from future problems, but title companies also perform extensive upfront research to ensure your title is clear. Some issues, such as missing heirs or falsified information, can be impossible to identify beforehand. However, many defects can be discovered in a title company’s search, allowing the matter to be resolved prior to closing.
Homeowner’s Insurance vs. Title Insurance
There are a couple of key differences between these two types of insurance. Homeowner’s insurance (a/k/a hazard insurance or property insurance) protects the physical structure of the home itself and your tangible personal property located at your home. Title insurance safeguards your ownership rights. Homeowner’s insurance is also intended to act as a safety net for problems that may arise in the future, while title insurance protects against things that occurred in the past.
How Farshchian Law Can Help
Title insurance gives you peace of mind that your ownership rights in your property are secure. We are licensed title agents who can help you with obtaining lien and title searches, and securing title insurance. We can also advise you on the best way to take title.
If you’d like to learn more about title insurance and its role in your Florida purchase or refinance transaction, call us at (800) 604-1871 or email us at Info@JFRealEstateLaw.com for a free quote and consultation. We offer real estate, title/closing, and probate services throughout the State of Florida.