The Schroeder Law Firm, P.C.

What is Title Insurance?

W. Harrison Schroeder, Esq.

Posted January 18, 2016, by W. Harrison Schroeder, Esq.

Title insurance is the application of the principles of insurance to risks which are present in all real estate transactions. Two basic categories of risks inherent in all real estate transactions are hidden hazards, such as forgery, fraud, incompetency of grantors, unknown heirs and impersonation, which cannot be detected in the most diligent title examination; and human errors, such as the clerk of court’s improper indexing or recording of legal documents and mistakes in searching legal documents. Title insurance, properly applied for, would protect against future losses caused by such events that happened in the past or prior to the issuance of the policy itself.

An owner’s title insurance policy would protect the title while you own the property and would continue to protect you and your heirs on the warranties you would give upon the sale of your property. A mortgagee’s or lender’s title insurance policy protects only the lender, and only until the loan is paid off.

If you paid the one-time premium to purchase an owner’s title insurance policy, the title insurance company would defend your title without cost to you, and, if the title, or any part of it, should be other than as insured, you would be reimbursed, up to the face amount of the policy (typically the purchase price), for any financial loss incurred.

A title insurance policy may be applied for by the attorney handling your closing. The policy may list exceptions to certain matters that it will not insure over, such as easements for access, public highways, and utilities in the chain of title. The title insurance policy will cover the possibility of a mechanic’s lien being filed against the property, if the seller can provide the proper affidavits. However, in the event that the property you are purchasing is new construction, the title insurance company may require that a certain amount of time pass before it will fully cover mechanics’ liens.

It is important to note that the title insurance policy will cover the title only up to the face amount of the policy (typically the purchase price). If you make improvements to the property, those improvements will not be covered unless the amount of the title insurance policy is increased by making further application for coverage.

I recommend owner’s title insurance to my clients, and almost all commercial lenders require that borrowers acquire lender’s title insurance in transactions involving loans.

Our firm handles all kinds of real estate transactions, including residential and commercial purchases, refinances, construction loans. Contact our office at (540) 745-4435 to schedule a consultation.

Burwell House
304 East Main Street
Post Office Box 156
Floyd, Virginia 24091-0156

Telephone: (540) 745-4435
Facsimile: (540) 745-4436

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