Title insurance is sort of like homeowners insurance right?
Wrong. Most people are familiar with one kind of insurance - casualty insurance - and assume that all insurance works the same way. It doesn't, and this misunderstanding causes confusion. We hope these questions will help clarify the difference between title insurance and casualty insurance.

Isn't all insurance basically the same?
To the extent that buying insurance protects you from the costs of unforeseen events and losses, yes, insurance is insurance. You buy homeowner's insurance in case a burglar breaks into your house, auto insurance to cover repairs after an accident, and life insurance to pay for your child's education if you are not there. These are all varieties of casualty insurance.Land title insurance protects you, too, but it covers a different kind of loss, and its one- time premium pays for much more than simple risk protection. In short, not all insurance is the same.

What does title insurance cover?
Land title insurance protects you from events which may have happened in the past, not events that are likely to occur in the future, as does casualty coverage like automobile, fire, and flood insurance. Title insurance charges are based on a cost - per - $1000 of the property to protect the homeowner from claims which could jeopardize all or part of his property.

Some common losses? Records misplaced in courthouses, boundary disputes, unpaid taxes, and hidden defects in the title like missing heirs, forgery, fraud and other items which do not show up in the most exhaustive title search.

What about the premium?
One of the most common ways to arrive at insurance premiums is to forecast likely losses and add administrative expenses and profit. It is not unusual for 90% of the premium amount to be paid out for claims.
In the title insurance business, on the other hand, we may pay out only 8% to 15% of the fee for claims, and people often assume that the rest is profit. But only a small part of the one-time fee paid at settlement is for insurance; the remainder is the cost of conducting the many different searches required to show a clear title to the property.

Am I protected?
Even the most intensive search cannot avoid claims.
Suppose there are back taxes owed on a property. We go into the local courthouse, review the tax files, and find no evidence of these back taxes because a file is missing. We then insure the property and the tax claim pops up. We pay 100% of that claim.

Without title insurance, the owner must pay claims like these. Liens, unpaid taxes, and sewer and water are assessments that are attached to the property - not to the person incurring the delinquency. If a previous owner had a judgment against his property, the new owner is responsible for payment. We insure against these circumstances.

Iím refinancing. Do I still need title insurance?
When you refinance you are obtaining a new loan, even if you stay with your original lender. Your lender will require lender's title insurance to protect their investment in the property. You will not need to purchase a new owner's title policy; the one you bought at closing is good for as long as you and your heirs have an interest in the property.

Even if you recently purchased or refinanced your home, there are some problems that could arise with the title. For example, you might have incurred a mechanics lien from a contractor who claims he/she has not been paid. Or you might have a judgment placed on your house due to unpaid taxes, homeowner dues, or child support, for instance. The lender needs reassurance that the title to the property they are financing is clear.

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