Protecting Your Home Investment
A home is usually the largest single investment any of us will ever make.
When you purchase a home, you will purchase several types of insurance coverage to protect your home and personal property. Homeowner’s insurance protects against loss from fire, theft title insurance protects against hidden title hazards that may threaten your financial investment in your home.
Why Is Title Insurance Important?
A homeowner needs title insurance because any home, no matter how new or apparently secure, is built on land as old as the Earth itself. Undoubtedly, this land has had many previous owners. Claims against any one of these persons can be filed against the property and against you as the present owner. Such hazards as fraud, missing heirs, old lines and many others can – and sometimes do – arise similar to ghosts out of the past. Title insurance protects a homeowner against these claims and title defects. (It makes your home safely yours.) The title insurance policy issued for your home is your shield of protection and will defend your ownership against loss insurance against the policy. It is your protection and peace of mind that will last as long as you and your heirs remain in title ownership.
How Much Does Title Insurance Cost?
Unlike the annual premiums of most other forms of insurance, you pay a one-time premium of title insurance. The premium will depend on the type of coverage you and or you and your lender request for the home and property.
Two Kinds of Title Insurance Benefit You in Two Ways
There are two basic types of title insurance policies: An owner’s policy and a lender’s policy.
Owner’s title insurance, which the seller typically pays for at closing, is issued generally for the amount of the purchase price. It protects the purchaser and the purchaser’s heirs as long as they own the property.
Most lenders require title insurance as security for their investment in the property. The borrower typically pays for the lender’s policy, which is issued for the loan amount.
How Does a Title Company Eliminate Risks?
Title insurers conduct an examination of the public records looking for matters affecting the title to the real property. These records can include among other things:
- Civil and probate court records
- Maintenance agreements
- Debts and other burdens
- Restrictions on the property
An important part of the title insurance process is eliminating risk prior to insuring, thereby reducing the possibility of claim or loss. However, even the most careful examination cannot disclose “hidden hazards” to title.
What Are Some Hidden Hazards?
Hidden hazards can emerge after completion of a real estate purchase creating an unpleasant and sometimes costly surprise. Some examples are:
- Forged deeds, releases or wills
- Undisclosed heirs claiming an interest in the property
- Documents executed under an expired or fabricated power of attorney
- Mistakes made in the public record
- Deeds executed by persons of unsound mind
- Gaps in the “chain of title”
- Invalid divorces
- Pending legal action against the property that could affect a purchaser
While many of these hidden hazards might not be revealed as a result of a routine title examination, they are covered under the terms of a title insurance policy. A title insurance company or title guaranty agency will defend the insured owner against an attack on their title and cover the cost of any settlement, including attorney fees.
Editor’s Note: Clark Saunders is the business development coordinator handling marketing for the Mat-Su and the Chugiak-Eagle River area for Alyeska Title Guaranty Agency, which is the only full-time Alaskan-owned and operated title and escrow company operating in the local area. Reach Saunders via email at: [email protected].