FAQ: Title Insurance
Have questions about Title Insurance? Click on the questions below for answers to some of the common questions about Title Insurance.
What Is Title Insurance?
A word About Real Estate
Real estate has traditionally been a family's most valuable asset. It is a form of wealth that is protected by many laws. These laws have been enacted to protect one's ownership of real estate and the improvements located on the land.
The owner, the owner's family, and the owner's heirs have rights or claims to the property that you are buying. Those who may have an interest in or lien upon the property could be governmental bodies, contractors, lenders, judgment creditors, the Internal Revenue Service, or various other individuals or corporations. The real estate may be sold to you without the knowledge of the party having a right or claim in and to the property. In addition, you may purchase the real estate without having any knowledge of these rights or claims. In either event, these rights or claims remain attached to the title to the property that you are buying until they are extinguished.
The Past can Determine Your Future
Generally, a person thinks of insurance in terms of the payment of future loss due to the occurrence of some future event. For instance, a party obtains automobile insurance in order to pay for future loss occasioned by a future "fender bender" or for the future theft of the car. Title insurance is a unique form of insurance. It provides coverage for future claims or future losses due to title defects which are created by some past event (i.e., event prior to the acquisition of the property.) These risks are far less obvious than those protected against by automobile insurance, but can be just as devastating. The following information will answer some commonly asked questions about title insurance.
Will You Get Clear Title?
It is of utmost importance that you receive clear title to the property when you purchase real estate. In order to do so, you must first be informed of any existing rights or claims that may, in the future, threaten your title and possession to the property. Title insurance provides you with this twofold protection.
How Do You Find Out What Claims Exist?
In order to determine the status of title, your closing agent conducts a diligent search of the public records for those documents associated with the property and then examines those recorded documents in order to determine if there are any rights or claims that may have an impact upon the title to the property. The title search may reveal the existence of recorded defects, liens or encumbrances upon the title such as unpaid taxes, unsatisfied mortgages, judgments and tax liens against the current or past owners, easements, restrictions and court actions. These recorded defects, liens and encumbrances are reported to you prior to your purchase of the property. Once reported, these matters can be accepted, resolved or extinguished prior to the closing of the transaction. With title insurance you are protected against any recorded defects, liens or encumbrances upon the title that are unreported to you and which are within the coverage of the particular policy issued in the transaction. This is the first benefit you receive from title insurance.
What About Undiscovered Claims?
The title to the property that you have purchased could be seriously threatened or lost completely by hazards which reconsidered "hidden risks." "Hidden Risks" are those matters, rights or claims that are not shown by the public records and, therefore, are not discoverable by a search and examination of those public records. Matters such as forgery, incompetency or incapacity of the parties, fraudulent impersonation, and unknown errors in the records are examples of "hidden risks" which could provide a basis for a claim after you have purchased the property. In order to protect you against this possibility, title insurance provides insurance coverage for such claims. This is the second benefit you receive from title insurance.
How Does a Title Insurance Policy Protect Against All These Claims?
If a claim is made against your insured title, your title insurance issuer protects you by: (1) defending your title, in court if necessary, at no cost to you, and (2) bearing the cost of settling the case, if it proves valid, in order to protect your title and maintain your possession of your property.
Title Insurance Protects Your Asset
Title insurance gives you the assurance that possible clouds on title to the property you are purchasing - which can be discovered from the public records - have been called to your attention that such defects can be corrected before you buy. Additionally, it is insurance that if any undiscovered claims covered by your policy arises out of the past to threaten your ownership of real estate, it will be disposed of, or you will be reimbursed exactly as your title insurance policy provides.
Only One Premium
Unlike other forms of insurance, the original premium is your only cost as long as you or your heirs own the property. There are no annual payments to keep your Owner's Title Insurance Policy in force.
Why Do You Need Title Insurance?
To protect possibly the most important investment you'll ever make - the investment in your home. With a title insurance policy, you as owner, have an indemnity contract that will reimburse you for loss in the event someone asserts a claim against your property that is covered by the policy.
How can there be a title defect if the title has been searched?
Title insurance is issued after a careful examination of copies of the public records. But even the most thorough search cannot absolutely assure that no title hazards are present, despite the knowledge and experience of professional title examiners. In addition to matters shown by public records, other title problems may exist that cannot be disclosed in a search.
What title insurance protects against
Here are just a few of the most common hidden risks that can cause a loss of title or create an encumbrance on title:
- False impersonation of the true owner of the property
- Forged deed, releases or wills, Instruments executed under invalid or expired power of attorney
- Undisclosed or missing heirs; Mistakes in recording legal documents
- Misinterpretations of wills Deeds by persons of unsound mind
- Deeds by minors
- Deeds by persons supposedly single, but in fact married
- Liens for unpaid estate, inheritance, income or gift taxes
What protection does title insurance provide against defects and hidden risks?
Title insurance will pay for defending against any lawsuit attacking your title as insured, and will either clear up title problems or pay the insured's losses. For a one-time premium, an owner's title insurance policy remains in effect as long as you, or your heirs, retain an interest in the property.
What this means to you
The peace of mind in knowing that the investment you've made in your home is a safe one.
On-Site Searching and Examining
Your title agent performs multiple searches: Property, Name, and Tax searches. From that information, a preliminary report is created.
The skill and expertise of our title professionals is the key to providing you with a useful, accurate title report. Once the report is issued the review begins by making a technical analysis of the documents of record. An interpretive view of all recorded matters is made to evaluate their impact on the title to the property. Among the questions the examiner asks are: Would any of the recorded matters prevent the buyer from using the property for its intended purpose? Can antiquated leases be eliminated from the policy per a review of the current leases?
Co-Insurance, Re-Insurance, Other Details
If co-insurance or re-insurance is needed for a transaction, we expedite the confirmation of approval. You, the client, are never bogged down or delayed by the action on the part of our company. To the contrary, as a resource and as a facilitator of the transaction, we assume the responsibility for as many details as possible and are able to direct you to other resources where necessary.
We Earn Your Respect with our Skills, Service and Solutions
We try not to point out impediments to the close of a transaction without also offering assistance and solutions. By understanding the sometimes delicate balance of the interests of the parties to a transaction, and by professionally and courteously handling issues as they arise, we can capably guide a transaction to a successful conclusion.
Documents in the Title Process
Commitment - Shows the condition of title in the way we are willing to issue it.
Pro Forma - Specimen of what the requested policy, as requested, will look like. Underwriting issues not completed. Not binding upon the company.
Policy - Final product. Contract of indemnity between named insureds and the company.
Reasons For Title Insurance
1. Buying Property Is A Numbers Business
2. A fire destroys only the house and improvements. The ground is left. A defective title may take away not the only the house but also the land on which it stands. Title insurance protects you (as specified in the policy) against such loss.
3. A deed or mortgage in the chain of title may be a forgery.
4. A deed or a mortgage may have been signed by a person underage.
5. A deed or a mortgage may have been made by an insane person or one otherwise incompetent.
6. A deed or a mortgage may have been made under a power of attorney after its termination and would, therefore, be void.
7. A deed or a mortgage may have been made by a person other than the owner, but with the same name as the owner.
8. The testator of a will might have had a child born after the execution of the will, a fact that would entitle the child to claim his or her share of the property.
9. A deed or mortgage may have been procured by fraud or duress.
10. Title transferred by an heir may be subject to a federal estate tax lien.
11. An heir or other person presumed dead may appear and recover the property or an interest therein.
12. A judgement or levy upon which the title is dependent may be void or voidable on account of some defect in the proceeding.
13. Title insurance covers attorneys’ fees and court costs.
14. Title insurance helps speed negotiations when you’re ready to sell or obtain a loan.
15. By insuring the title, you can eliminate delays and technicalities when passing your title on to someone else.
16. Title insurance reimburses you for the amount of your covered losses.
17. A deed or mortgage may be voidable because it was signed while the grantor was in bankruptcy.
18. Each title insurance policy we write is paid up, in full, by the first premium for as long as you or your heirs own the property.
19. There may be a defect in the recording of a document upon which your title is dependent.
20. Claims constantly arise due to marital status and validity of divorces. Only title insurance protects against claims made by non-existent or divorced "wives" or "husbands."
21. Many lawyers, in giving an opinion on a title, protect their clients as well as themselves, by procuring title insurance. Over the last 24 years, claims have risen dramatically.
How You Take Title – Advantages and Limitations
Title to real property may be held by individuals, either in Sole Ownership or in Co-Ownership. Co-Ownership of real property occurs when title is held by two or more persons. There are several variations as to how title may be held in each type of ownership. The following brief summaries reference seven of the more common examples of Sole Ownership and Co-Ownership.
A man or woman who is not married.
Example: John Doe, a single man.
An Unmarried Man/Woman
A man or woman, who having been married, is legally divorced.
Example: John Doe, an unmarried man.
A Married Man/Woman, as His/Her Sole and Separate Property:
When a married man or woman wishes to acquire title as their sole and separate property, the spouse must consent and relinquish all right, title and interest in the property by deed or other written agreement.
Example: John Doe, a married man, as his sole and separate property.
Property acquired by husband and wife, or either during marriage, other than by gift, bequest, devise, descent or as the separate property of either is presumed community property.
Example: John Doe and Mary Doe, husband and wife.
Example: John Doe, a married man.
Joint and equal interests in land owned by two or more individuals created under a single instrument with right of survivorship.
Example: John Doe and Mary Doe, husband and wife, as joint tenants with rights of survivorship.
Tenancy in Common:
Under tenancy in common, the co-owners own undivided interests; but unlike joint tenancy, these interests need not be equal in quantity and may arise at different times. There is no right of survivorship; each tenant owns an interest, which on his or her death vests in his or her heirs or devisee.
Example: John Doe, a single man, as to an undivided 3/4th interest, and George Smith, a single man as to an undivided 1/4th interest, as tenants in common.
Title to real property in Florida may be held in trust. The trustee of the trust holds title pursuant to the terms of the trust for the benefit of the trustor/beneficiary.
The preceding summaries are a few of the more common ways to take title to real property in Florida and are provided for informational purposes only.
There are significant tax and legal consequences on how you hold title. We suggest contacting an attorney and/or CPA for specific advice on how you should actually vest your title.