What is title insurance? Title insurance provides protection against future losses than could result from unknown title defects or encumbrances that existed at the time of closing. Some of the common defects covered by title insurance are:
- Improper execution of documents.
- Inaccuracies in the recording or indexing of legal documents.
- Erroneous legal description of the property.
- Forgery and/or fraud
- Unpaid taxes or assessments with respect to the property.
- Unpaid judgments and/or liens against previous owners or the property itself.
Even though the title agent will perform a title search (see below), some defects may not or cannot be revealed through this search no matter how thorough.
What is a title search? The title search is performed by the title agent prior to closing. The title search is a detailed search and examination of the public records in the county where the property is situated. The search verifies the property owner’s true interest in the property and authority to sell the same. This search will uncover, most, if not all, defects, claims or other inaccuracies in the chain of title. The title search protects all parties involved in the transaction since defects in title are transferred with ownership.
What are the different types of title insurance? There are two (2) types of title insurance coverage for real estate in the State of Florida. They are:
- Owner’s Policy. The Owner’s Policy protects the interest of the owner in the event there are undiscovered defects property. This policy is required only on purchases of real property. This coverage is valid as long as you, or your heirs own the property. The seller (depending on the county in which the property is situated) will pay the premium at closing and will not be required to renew the premium, this is a one-time fee. Please note however, while this coverage is not required on cash purchases of real property, it is highly recommended that you obtain this coverage.
- Mortgage or Loan Policy. The Mortgage or Loan Policy protects the interest of the lender in the event there are undiscovered defects on the property. If you are securing financing for the purchase or refinance of real property, the lender will require that a Mortgage or Loan Policy be issued by the title agent. This coverage is valid as long as you maintain the mortgage on the property. You will pay the premium at closing and will not be required to renew the premium, this is a one-time fee per mortgage (i.e. refinancing will cause a new policy to be issued for the benefit of the new lender).
How much does title insurance cost? The Owner’s Policy premium is based upon the purchase price of the property. The Mortgage or Loan Policy premium is based upon the loan amount. The premiums are regulated by the State and are non-negotiable.
Should a claim arise against the property, how does title insurance protect me? Should a claim arise out of a defect in title, the underwriter of the title insurance policy will assure you receive a legal defense and pay all court costs and related fees. Should the claim be judged as valid, you will be reimbursed for your actual loss up to the face amount of the policy.