Catch The Title Wave!

What on earth is Title Insurance? Is it simply insurance against bad title? Well, yes – but what does that even mean? The truth is, most people have no idea.

What is Title Insurance?

Title Insurance is a form of indemnity insurance that insures against financial loss from defects in title to real property. Still scratching your head? Here’s how it works — when you purchase property or place a loan on property, chain of title must be searched. Unfortunately, despite the thoroughness of title examinations, certain defects in title may be hidden or undiscoverable. Great financial loss can result from these undiscoverable defects — this is why Title Insurance exists.

Why is it Important?

Undiscovered defects in title can potentially affect legal ownership of the property. Need an example? Lets pretend Mr. Buyer wanted to purchase a house in Maryland from Mr. Scammer. Chain of title was examined and no defects were discovered. Mr. Buyer then chose to purchase the house with cash and without an Owner’s Title Insurance Policy.

Five years later, Ms. Owner comes along and claims to have legal ownership of Mr. Buyer’s property. Attorneys are hired, suit is filed, and litigation ensues. It is later proven that Ms. Owner’s name was forged on the deed that “granted” ownership to Mr. Scammer.

If Mr. Scammer never had legal ownership of the property to begin with, what does that mean for Mr. Buyer? The answer is nothing good. Mr. Buyer is not the legal owner of the property. He may have other legal remedies available to him but the cost of pursuing those remedies will be high and the likelihood of recovering what he paid for the house is low. Had he purchased an Owner’s Title Insurance Policy, he likely would have been insured against the financial loss resulting from this event.

Starting to make sense? Good. But before you go, you need to know one more thing.

A Lender’s Title Policy is NOT the same as an Owner’s Title Policy.

The Loan or Lender’s Policy is issued only to the mortgage lender. Most lenders require the borrower to pay for this policy in order to ensure that the collateral is valid. The Lender’s Policy does not protect the owner’s equity in the property and will not pay the owner’s legal expenses if there is a title problem. Only an Owner’s Title Insurance Policy will protect the homeowner. An Owner’s Title Insurance Policy is usually purchased at the time you purchase the property. At settlement you will pay a one-time policy premium that will cover you for as long as you own the property. If you refinance, you will not have to pay for a new owner’s policy but you will have to pay for a new lender’s policy.

Since your home is likely your largest investment, it is very important that you protect that investment with an Owner’s Title Insurance Policy. Purchasing a home without one is simply not worth the risk.

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Jeffrey T. Bald, Esq. President
192 Duke of Gloucester St. • Annapolis, MD 21401
(410) 267-9300 • (410) 269-1900 office • (410) 269-6477 fax

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