Purchasing title insurance is one of the first steps that new homeowners should take to protect their property. It is crucial for the simple reason that it protects you, as the homeowner, from the possibility that the seller does not have the right to sell the property.
While the chances of needing to call on title insurance are relatively low, the policy itself is important.
How does title insurance work?
Most forms of insurance protect you from future events, such as fire or theft. Title insurance works a little differently. It protects you against past actions that might come to light, such as the forgery of important paperwork by a previous owner, or complications that exist with the home due to a divorce and remarriage.
If you buy a home that was sold through fraudulent actions, then the title insurance company could simply buy out the legal owner on your behalf. The company will also investigate the matter with its own team of attorneys, which can save you a great deal of money and time. Title insurance can also provide you with a hedge against any losses you might incur.
What kind of coverage is needed?
Standard coverage will do in almost all cases. The boilerplate protections offered by most title insurance companies cover all the basics you need to worry about, including:
- Fraud
- Forgery
- Undisclosed heirs
- Spousal claims
There are additional levels of protection available, but unless you have run a title search and found problems you need to prepare for, they are rarely necessary. If, however, you do find a problem, then it could be worth your while to increase your coverage.
Do I have to pay the insurance fee?
In Florida, the person you buy the home from is usually the one who is required to pay for the title insurance. However, this depends on the county you live in, so you should talk to your real estate agent about it. Be prepared, though. If you start making specific demands, such as choosing the insurance provider or increasing coverage, then you may have to pay for the insurance, yourself.
What is the cost for title insurance?
The purchase price of your home will influence the amount of money that you have to pay for your title insurance. Usually, you pay one rate for every $1,000 up to the first $100,000 in the price, and then the rate goes down slightly for every $1,000 after that. It should also be noted that this is not a continuous fee. You pay just one time for the insurance when you finalize the purchase of your new home.
Whose advice should a buyer follow?
In any real estate transaction, the parties involved often receive advice from a number of sources. Therefore, it is worthwhile to ask whether or not any of the parties giving you advice are financially involved with their recommendations. In most cases, you should give extra credence to your lending institution’s advice regarding title insurance, because your policy protects their interests too.
What if there is a problem with the title?
In theory, if there is a problem with the title, then your title insurance should cover your financial interests. However, if your title insurance company attempts to deny your claim, then it may be time to talk to an attorney about your options.