Before answering some common questions about title insurance, it’s important to know what this type of insurance really is. Title insurance is a type of indemnity insurance that insures against financial loss due to defects in title to property and other unforeseen hazards that result in a claim against one’s ownership. Simply put, it is insurance that protects lenders and real estate owners against property loss or damage due to defects in the title to the property. If you possess the title to a property, title insurance can benefit you greatly. Here are some common questions about title insurance:
How is title insurance different from other insurance?
Common insurance like health, car, and life policies are usually paid via monthly or annual premiums and protect against potential future events involving your person and automobile. Title insurance is paid for via a one-time premium at the close of the escrow (the process in which the funds of a transaction are held by a 3rd party) and protects against claims from defects in the title to a property.
Why do I need title insurance?
Purchasing a home or property is an intricate process that can sometimes be overwhelming to the buyer. Unfortunately, there can be hidden defects in the title to your property that may be overlooked by you or anyone conducting a title search, which may cause major issues for you in the future. Title insurance ensures you are protected from these hidden defects and any financial loss that might accompany them, and pays the cost of defending against claims.
How much does title insurance cost?
As stated earlier, title insurance is paid for via a one-time premium. The cost relates directly to the value of your property or home. It is usually less expensive than your yearly automobile insurance. The policy is paid for in full at the time of purchase of your property/home.
What types of policies are available?
Depending on your title company, you will have a few different types of policies to choose from. Standard coverage covers risks like forgery, inadequate legal descriptions, lack of a right of access, and deeds not properly recorded. Each policy covers more defects than the last, and full-coverage policies are often available for purchase.
What risks are associated with not purchasing title insurance?
In very extreme cases, a seller might knowingly attempt to sell you a home they do not legally own. Properties purchased by two or more parties jointly can be illegally sold by a single party without involvement of other parties. Liens may be filed against the house that are overlooked at the time of purchase. These scenarios can result in title defects which can cause minor to major financial losses for the buyer.
Armour Title Company is an attorney owned and operated title company that offers services locally, regionally, and nationwide. We are available 24/7 to assist you with all your title and escrow needs. Contact us today with any questions about title insurance in Maryland, or to set up a consultation.