While most homeowners and buyers are aware of the benefits of homeowner’s insurance, title insurance is less commonly known but just as important. Title insurance insures the title of your property, including your rights to own, use, and eventually sell your home.
In some states, including Florida, you are required to obtain title insurance when purchasing a property with a loan. Before you purchase a property, your title agent will search for any known issues associated with the title before creating your insurance policy. Typically, your title company will oversee the closing process and transfer the title of the property to you once all terms of the sale are finalized.
How Does Title Insurance Help You?
A title is a formal document filed in public archives that legally establishes your ownership rights to the property, including the right to use and sell it in the future. Title insurance protects you from any unforeseen disputes and losses associated with the title.
Here is an example: An unknown heir to the previous homeowner challenges your rights to the property. It is discovered that they have a legitimate claim and are listed on a will that was not in the public records at the time you purchased the property. Their challenges are successful and you lose your property and all of the money you invested in the home to date. In this worst-case scenario, title insurance would help cover these sudden financial losses, just like your home insurance policy would protect you from major losses after a hurricane or fire.
Title insurance can insure you from financial losses stemming from the following:
- Unpaid property taxes
- Liens against the property
- Boundary disputes
- Property deed errors
- Forged title documents
- Challenges to your ownership from hidden co-owners or unknown heirs
While your title agent will search public records for any issues associated with a title prior to your closing date, if something unforeseen does come up after you have purchased the property your insurance policy will protect you. In addition to compensating you in the event that you lose your ownership rights to the property, it can also help cover other financial losses caused by title defects, such as a decrease in the property value, unpaid taxes you suddenly owe, mortgage payments made on a property lost in an ownership dispute, and more.
When Do I Need Title Insurance?
You should open a new title insurance policy when purchasing a new property. If you require a loan, your lender will ask that you also get a lender’s title insurance policy. The lender’s title insurance policy will remain in effect throughout the duration of your mortgage while your owner’s title insurance policy will protect your interests until you sell the property. In addition to writing an insurance policy for you, your title agent can help search for any potential problems associated with a title before you buy a property as well as manage the closing process.
The Closing Process
Lender’s Title Policy Vs. Owner’s Title Policy
Title insurance policies are similar for property owners and their lenders. Both protect against unforseen losses associated with a property title. Usually, the bank that issues your mortgage will have its own title policy that protects its financial interest in your property. This policy does not cover you as the property owner: Owners must obtain their own title policy.
How Much Does Title Insurance Cost?
Unlike other forms of insurance that require a monthly premium, you pay a one-time premium for title insurance. It is usually paid while closing on a new property and it remains in effect until you sell the property.
Title insurance premiums are determined by each state. In Florida, insurance premiums are calculated based on a percentage of the property purchase price: $5.75 per thousand up to $100,000 and $5.00 per thousand for property sales greater than $100,000.
For example, if the property you are buying costs $100,000, your title insurance premium would be $575.
The Sentinel Advantage
Sentinel Title & Trust gives you the confidence you need when investing in a new property. Our team of title agents and real estate lawyers can help you spot issues with a property before they become a problem. When unforeseen problems arise after you have already closed, we’re there to help you minimize your losses and rebound as quickly as possible.
Your property is one of your greatest financial investments. Protect it with help from Sentinel Title & Trust.