What is TITLE INSURANCE and why do I need it?
A title insurance policy is a contract for indemnity against loss or damage resulting from a defect, lien or encumbrance upon the title of the insured property. Title insurance covers past events, NOT future events. There two types of title insurance policies ~ Lender’s and Owner’s
1. Lender's Title Insurane
a. Is required on all loans
b. It is based on Loan Amount
c. As the loan balance is reduced, so is the amount of policy coverage for the lender.
d. The lender’s title insurance policy is specific to the loan. So if the homeowner refinances, their new lender will require the homeowner to buy a new lenders title insurance policy for the new lender.
e. The Lender’s policy does not, in any way, give the homeowner any title insurance coverage.
2. Owner's Title Insurance
a. Is optional
b. Is based on Sales Price
c. There are two types of Owner’s Policies
ii. Advantage or Enhanced
d. The Owner’s Title Insurance policy covers the homeowner for the life of the chain of title, in other words ~ forever!. This is a one-time purchase at the time of the closing so no new Owner’s policy is required if the homeowner refinances.
3. Cost of Insurance is set the State Corporation Commission, Bureau of Insurance.
4. A title company is licensed through the Bureau of Insurance to issue and sell title insurance policies. Continuing education is required to maintain the title insurance license.
5. Waiving Owner's Title Insurance
a. This is always a bad idea.
b. We need to make sure as the Purchaser you are educated about title insurance and understands the risk you would be taking if you waived an owner’s policy. Often Purchasers have received incorrect and/or inaccurate information and are basing their decision to waive title insurance on this faulty information.
c. Title Insurance Myths:
i. Since the title report is clear, title insurance is unnecessary.
ii. A brand new house does not need title insurance.
iii. I trust the Seller.
iv. I can sue title company later if there are title problems because "that is their job".
d. Purchasers who waive title insurance will sign an explicit Waiver at closing.
e. If you as the Purchasers want to waive title insurance, advise your settlement agent in advance of the closing. It is best to address and resolve this before the closing rather than have this lengthy discussion at the closing table.
4545 Daisy Reid Avenue, Suite 100
Prince William, Virginia 22192