Buying property whether residential or commercial is not an easy deal. It is a complicated process and one of the big financial decisions an individual can ever make. Therefore, it is important to get familiar with legal procedures, terms & conditions. And, title insurance is something without which you cannot turn the dream of owning a property into reality.
Let’s explore the term title insurance in depth.
The term title insurance is associated with a property. Whenever a property is financed, bought, or sold, a record of related transactions is filed in public archives. Similarly, records that may affect the ownership of a property such as liens or levies are archived as well.
Title insurance is a form of guarantee insurance which insures against financial loss due to defects found in a title to real property and from the invalidity or unenforceability of mortgage loans.
Title insurance company plays a crucial role in property related matters. If you buy title insurance for your property, the company works in two ways. First, it searches public records to obtain the ownership status. Once this search gets over, the underwriter determines the probability of the title insurance.
A Title Company ensures every detail investigated is correct and transactions will be risk-free. For this, they provide a title insurance policy protect buyer’s and lender’s interest from a variety of issues that may appear later as a bad surprise. It is a smart step to protect the ownership of your property as you pay for this policy only once and it lasts as long as you own your home.
If we summarize this whole explanation in one line, then title insurance is evidence that the owner is in lawful possession of his/her property.
Therefore, while making this huge financial decision, buying title insurance will bring a peace of mind.
How Title Insurance is Different from Other Insurance?
If we talk about other sorts of insurance policies like the car, life, health, accident, and other, they all insure against the potential future event that may happen. Further, general insurance is paid monthly or annually. While on the other hand, a title insurance policy protects against events that occurred in the past of property including details like previous owners and the probability of their claim against the property. It involves paying a one-time premium at the close of the escrow.
What is Escrow?
Escrow is a financial arrangement in which a third party, often the title company holds and regulates funds of the transactions happened between two parties, buyer, and seller. It makes transactions more secure where the funds are kept secured in an escrow account and released when all of the terms and conditions of an agreement are met and verified by Tile Company.
When is Title Insurance Policy created?
At first place, an escrow officer opens the title order, and the title search begins. Once the search gets over, a preliminary report is given to the customer to review and approve. Every document is recorded upon escrow’s instruction and once recording gets over, demands are paid, and funds are disbursed, title insurance policy is created.
Who Benefits From Title Insurance?
Buyers and lenders need title insurance to be protected against possible title defects. Title insurance covers claims from defects, so it is beneficial for all buyers, lenders, and sellers.
Title insurance, without a doubt, a smart move for buyers to protect their hard-earned invested money. Further, it also helps lenders to be insured for the amount they finance in a real-estate property.