What is title insurance?
Title insurance provides coverage for various losses that may occur during and after the transfer of title. Many times losses and defects in title may have occurred in the past, prior to the transfer. Other times losses may occur due to defective title, inaccurate documents, fraud, forgery, and similar matters that may occur during or after the closing of escrow.
Title problems are many times discovered months or even years after title transfer has occurred, therefore it becomes extremely difficult to cure such defects on your own. There are hundreds of issues that may become a title "defect", but most common ones are as follows: unsatisfied judgments, unpaid taxes and liens, unpaid or past due homeowners association fees, unsatisfied mortgages, clerical errors, unrecorded instruments, inaccurate legal descriptions, probate matters and missing heirs, etc. There are way too many issues to describe here, but in many instances title defects may create a "cloud" in the title and evenSeller Testimonials make the title unmarketable.
Should a title issue become a claim, then the title insurance company will either provide means to cure the defects, or will pay for the loss sustained, under the terms and conditions of the policy. Many times the title insurance company will provide legal defense to the insured, and fight to protect his/her rights in a case of a title claim.
There are two types of title insurance:
Owner's Policy of Title Insurance - this is a policy that is issued to the buyer of the home. It will protect the interests of the buyer up to the purchase price of the property.
Lender's Policy of Title Insurance - this is a policy issued to the lender, if the buyer is taking out a mortgage for the purchase of the home. This policy protect the lender's interest in the property, up to the original loan amount.
The cost of title insurance is regulated by the State of Florida Department of Insurance. The Department issues rates that are allowed to be charged by the title companies, called promulgated rates. The following is a brief overview of the current rates approved by the Department:
There are certain discounts and additional fees approved by the Department. For detailed information on all title insurance fees, charges, and discounts, as approved by the Department, please visit: https://www.flrules.org/gateway/ChapterHome.asp?Chapter=69O-186
It is important to understand that title insurance is not like other forms of insurance. Title insurance is paid only once, at the time of issuance, which makes it different than most other forms of insurance which need to be paid annually to stay effective. Once title insurance is purchased it protects the insured until he/she owns the property, or the lender, until the loan is paid in full.