Frequently Asked Questions

Title Insurance FAQ

What is title insurance?

When you buy property, you want to be sure that no one else
has an ownership, interest, or claim on your new property. Title insurance gives you that peace of mind. Title insurance does not guarantee that title defects do not exist, but instead protects you from claims against your property if defects covered by the policy are later discovered. You pay a one-time premium for a title policy and the coverage remains effective as long as you own the property.

For lending institutions, title insurance provides protection against the loss of the loan amount resulting from a defect in a title. Because the risks are different, lenders are often given coverage that owners are not. A lender's coverage terminates when the loan is paid off.

Should I buy a title insurance policy?

Absolutely. When you buy property, you want to rest assured that the property will be yours and that no one else will have liens, claims or encumbrances against your property other than those disclosed to you or arranged by you (such as a mortgage). Title insurance helps prevent the potential loss of your property due to these issues. If you are buying or selling property, having a title policy protects the transaction and gives everyone involved peace of mind.

Is title insurance worth the cost?

Yes, title insurance is one of the best insurance values available. The premium you pay is based on the purchase price of your property and rates are regulated by each state. You pay only a one-time premium when you purchase your policy and this coverage lasts as long as you own your property — and will protect you even after you sell your property.

Title insurance also covers payment of legal costs to defend your title and payment of all covered, claims up to the face amount of the policy.

Property owners in many states can take advantage of a “simultaneous issue rate”. When a lender's policy is purchased at the same time as the owner's policy, its cost is included in the owner's policy premium without additional charge.

Is there a difference between a lender's policy and an owner's policy?

Yes. A lender’s policy protects the money they have loaned for the purchase of a property, and their coverage expires when the load in paid off. Virtually all lenders require a lender’s policy to protect the money they have loaned to purchase a property.

Through an owner’s policy, a buyer obtains additional protection that covers the owner’s interests exclusively. Coverage includes protection of the total purchase price, and the policy remains effective as long as the buyer owns the property.

How does title insurance work?

Most types of insurance are “assumption of risk” forms of coverage and cover specific events that take place in the future. Title insurance is a “risk elimination” form of coverage and looks backwards to cover certain unknown events that may have taken place in the past.

A title policy insures an owner or lender against loss or damages arising out of defects to or liens on titles which are not disclosed in the title policy and that occurred prior to the issuance of the policy. Title searches uncover many of these issues, and known risks found in a search are addressed — thus the term “risk elimination”. 

However, there are some defects that may not be discovered in even the most diligent title search. Title companies assume the liability for these hidden defects thereby protecting you against:

  • Financial Loss — The title insurer is responsible for covered claims against your property, up to the face amount of the title policy
  • Legal Cost — The title insurer pays to defend your title against a covered claim

If a claim is made against your title, your title insurer takes care of it for you. This includes negotiating the claim, defending the claim in court, all legal costs incurred, and paying the amount necessary to satisfy the claim.

What problems can arise with a title?

There are virtually no perfect titles. Government restrictions, utility easements, claims of adverse possession, and tax liens are examples of limitations, or defects that can impact a title. Title searches disclose many of these limitations or defects. However, there are some that may not be discovered in even the most diligent title search. Examples of such defects are:

  • Forgery, false impersonation, and incorrect legal descriptions
  • Deeds delivered after death, deeds from incompetent persons or minors, or deeds not properly delivered
  • Misinterpretation of wills, deeds, or marital status of grantor
  • Wills not properly probated or undisclosed or missing heirs
  • Mistakes in recording legal documents
  • Record defects, liens, encumbrances, adverse claims or matters not known or disclosed to the new owner that attach before the date of policy
  • Lack of legal right of access
What types of claims are generally covered by title insurance?

The following are types of claims that are generally covered by a title policy.

  • Forged documents, such as deeds and wills
  • Fraud
  • Lack of competency, capacity or legal authority of a party
  • Conveyances not joined in by a necessary party—i.e.: spouse, heir, corporate officer, managing member
  • Unsatisfied mortgages or record
  • Incomplete or erroneous probate or lack of probate
  • Mistakes in legal descriptions or recording errors
  • Deed not properly recorded
  • Judgments or liens against a prior owner or the property
  • Unpaid real estate or inheritance taxes

If a claim is made against your title, your title insurer takes care of it for you. This includes negotiating the claim, defending the claim in court, all legal costs incurred, and paying the amount necessary to satisfy the claim.

If my lender gets title insurance for my mortgage, why do I need a separate policy for myself?

The lender’s policy only insures the lender's interest, covering only the amount of the mortgage loan — which typically is not the property value. Lender’s coverage also expires when the loan is paid.

Buyer’s coverage protects your total purchase price, and the policy remains in effect as long as you own the property or have any liability to future owners based on the warranties of title you make when you sell the property. In addition, in the event of a claim, there is no provision for payment of legal expenses for an uninsured party. So, without a buyer’s policy you are responsible for your own legal costs.

The content of this website is informational only. It does not constitute tax, legal or accounting advice. Each situation is different, and you are advised to seek appropriate professional advice to learn if a 1031 Tax Deferred Exchange meets your needs.

Contact Us

  • BridgeTrust Title Group
  • 3318 W. Friendly Ave., Suite 400
  • Greensboro, NC 27410
Office:
336-691-3681
800-552-5891
Fax:
800-633-8254
Email:
BridgeTrust Title Group - Greensboro
 

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Services offered vary by state. In certain states, including North Carolina and South Carolina, BridgeTrust Title Group and its Affiliates do not offer title search/examination and certain closing services to non-attorney customers and, in those states, such activities are performed only under the supervision of an attorney duly licensed in that state. [Any inquiry for such services will be treated as a request for a referral to an attorney in that state.]

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