The question comes up frequently "What is Title Insurance?"
To try to explain as simple as possible, title insurance is available to protect owners and lenders from loss that may result in any possible defects in the title to real estate. Title policies and regulations are complicated. For more information go to the websites for the Texas Land Title Association (www.tlta.com) and/or Texas Department of Insurance (www.tdi.state.tx.us).
As a Realtor, I recommend all buyers obtain an Owner's Title Policy. The important thing to remember is that you only pay once, then the coverage continues in effect for so long as you have an interest in covered property. If you should die, the coverage automatically continues for the benefit of your heirs. Generally, the person selling the property is responsible for paying for the Owner’s Policy. Determining who pays for the Owner’s Policy can be negotiated, however, and may be partially paid for by the person buying the house. The premium amount for the Owner's Title Policy is determined by the sale price of the home. This insurance provides you with protection against specific title risks. Some of these risks include:
- Clerical Mistakes
- Defective Acknowledgement on Documents
- Delinquent Taxes
- Forgery
- Fraud
- Illegal Trusts
- Lost Wills
- Mistakes in Legal Description
- Platting Discrepancies
- Undisclosed Heirs
If a lender is involved, the lender will require a Mortgage Policy of Title Insurance is issued to the lender. The purpose of this insurance is to validate the lien that the lender has on the property. .The lender's policy covers only the amount of its loan, which is usually not the the same amount as the Owner's Title Policy. The person borrowing money in order to pay for the home is responsible for paying for the Mortgage Policy. The premium for the Mortgage Policy is determined by the amount of the loan.
Before a policy is issued, a careful search of public records associated with real estate is performed by an abstractor. In order to complete its research accurately, title companies must utilize their abstract plant. The abstractor researches all recorded instruments that may effect the property such as death, deeds, divorces, mortgages and other liens. After this information is thoroughly examined, the title company will issue a Title Insurance Commitment upon the decision they are able to issue a title insurance policy. The title insurance policies will be issued upon closing and funding of the property.
