Question:

What is included in a standard title insurance policy?

Answer:

The standard title insurance policy exists in two basic types - owner's and lender's coverage. The lenders title policy will be purchased with every home buying or home refinancing transaction. The owners title insurance coverage is not obligatory and cannot be transferred to a subsequent home buyer.

  • The standard lenders title insurance policy protects the lender for the duration of the loan and up to the existing loan principal. It is a decreasing type of insurance policy. When the loan is repaid or refinanced, the lender title policy is no longer valid.
  • The standard owners title insurance policy covers the buyer's ownership interest in the property - only past history and previous owner acts existing before the date the title policy was bought are covered. For title issues arising after the policy was bought extended title coverage is needed.

Sometimes, it is recommended that extended title coverage is purchased; sometimes it may not make sense to buy owners title coverage. It is suggested that you buy a combined lender - owner title insurance policy to reduce the costs and get the most of it.

The standard title insurance is very property specific.

The standard title coverage addresses previous tax liens and mortgages. It is supposed that most title issues creating a "cloud on the title" affecting the title marketability will be removed prior to the real estate transaction.

98% of title defects uncovered through a title search are removed prior to signing the title policy. If the existing title defects cannot be removed before the home purchase takes place, the buyer is given the choice to

  • Not purchase the property;
  • Accept the defect. In that case, the title policy will specifically exclude the defect from the coverage.
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