The Importance of Title Insurance
There are numerous types of insurance coverage to protect your home and personal property. Along with homeowners insurance and flood insurance, title insurance protects against hidden title hazards that may threaten the financial investment in your rental homes. In some cases, the title to the property that is being purchased may be limited by rights and claims asserted by others, which may limit your use of the property and even bring financial loss. Title insurance protects against loss from hazards and defects that already exist in the title.
An important part of title insurance is its emphasis on risk elimination before insuring. This gives you, as the policyholder, the best possible chance for avoiding title claim and loss. Title insuring begins with a search of public land records affecting the real estate concerned. An examination is conducted by the title agent or attorney on behalf of its underwriter to determine whether the property is insurable. The examination of evidence from a search is intended to fully report all “material objections” to the title. Frequently, documents that don’t clearly transfer title are found in the “chain,” or history that is assembled from the records in a search. Below are some examples of documents that can present concerns:
- Deeds, wills and trusts that contain improper wording or incorrect names
- Outstanding mortgages and judgments
- A lien against the property because the seller has not paid taxes
- Easements that allow construction of a road or utility line
- Pending legal action against the property
- Incorrect notary acknowledgments
Through the search and the examination, title problems are disclosed so they can be corrected whenever possible. However, even the most careful preventative work cannot locate all hidden title hazards. Some examples of hazards include:
- A forged signature on the deed
- An unknown heir of a previous owner who is claiming ownership of the property
- Instruments executed under an expired or a fabricated power of attorney
- Mistakes in the public records
Title insurance offers financial protection against these and other covered title hazards. The title insurer will pay for defending against an attack on a title, and will either perfect the title or pay valid claims. Before you go to closing, look into title insurance protection, and be sure to protect your rental home investment with an owner’s title insurance policy. Visit us at www.b2rfinance.com and follow us on Twitter @B2RFinance.
The information on this page is provided for informational purposes only and does not constitute investment, real estate, or legal advice. This information should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. No representations or warranties whatsoever, express or implied, are given as to the accuracy or applicability of the information contained herein. The information may be modified or rendered incorrect by changes in the marketplace or developments in the law, or for any other reason, and may not be applicable to any individual reader’s facts and circumstances.