Title Insurance
Some Answers to Questions About Title Insurance
Q. What is title insurance?
A. Title insurance is a type of insurance which protects against any defect in the legal history of a piece of property. When a lawyer searches the title, he or she ordinarily examines only the public records as shown on the abstract of title. This procedure should uncover any recorded problems with title. However, some types of land title problems may not appear on the public record, as shown on the abstract.
For example:
- A past deed might be forged and therefore would not actually convey the title.
- The spouse or heirs of a former owner of the property might not have given up their interests in the property when it was sold.
- A past deed might have been signed by a minor or by a person who was mentally incompetent.
- The records themselves might be improperly filed or indexed.
- The abstract company may set out the records incorrectly.
No matter how carefully a lawyer searched the public records, he or she could not be expected to learn of problems such as these. Title insurance protects against these and other risks.
Q. If I am the buyer, and the lender requires me to pay for title insurance, does that insurance protect me?
A. No! There are two kinds of title insurance. A lender’s or mortgagee’s title insurance policy protects only the lender against any monetary loss the lender suffers.
Further if the lender does suffer a loss that is reimbursed to the lender by virtue of the lender’s policy, it may be expedient on the part of the title insurance company to buy the mortgage from the lender and then sue the uninsured owner for the cost of the title defect.
Therefore if an owner does not have their own policy of insurance, such an uninsured owner may be ultimately responsible for all losses personally.
Q. How does an owner’s policy protect me?
A. An owner’s policy insures to you that the title to your property is good. If in the future any party challenges your title and takes you to court, the title insurance company will pay the expenses of going to court in order to establish the validity of the title. In addition, if you should lose any or all of your land as a result of that lawsuit, the title insurance policy will pay up to the amount of the policy for your loss.
Usually the policy is issued in the amount of the purchase price of the property. You may also request a rider to your policy, known as a Market Value Rider, which protects you in the event of future increases in the value of your property. This rider will allow you to be paid the value of your property at the time of the loss, not just the amount you paid for it.
Q. How much will title insurance cost?
A. The cost of title insurance, whether secured for the benefit of the lender or the owner, is based upon the amount of coverage. Rate tables are established by New York State law. The owner’s policy is charged at the established rate, with the lender’s policy issued at a discount if obtained at the same time as the owner’s policy.
For example:
- Purchase price $80,000.00
- Mortgage amount $75,000.00
- The cost of the lender’s policy alone in such a case would be: $501.00.
- If both policies are issued at the same time, the cost to add your owner’s policy would be only: $ 179.00.
Your lender may require coverages on your lender’s policy in addition to the basic coverage which may raise the cost to you.
You may contact our office to obtain a cost quotation for your specific circumstances.
** PLEASE NOTE ** that Steve Butcher, Sr., Esq., is the title agent and therefore will be benefited by any sale of its policies.
At the time of your closing, you will find that the cost of an owner’s policy has been included in your closing figures. If, after speaking to Mr. Butcher, you decide against its inclusion, this cost will be omitted from your statement.