When you buy a home, there are already a lot of moving pieces in place that transfer from the current owner to you at closing. While worrying about getting the utilities set up in your name and funding all the escrow accounts will likely take up a significant portion of your mental bandwidth, you may have forgotten to even think about title insurance and what happens during a home purchase. If the current homeowners have title insurance, does it transfer to you? If you paid for title insurance on your previous dwelling, can you take it with you to the new one? What if you only want the insurance policy to move between people in the same family? It is important to understand how title insurance works in this scenario so that you can properly plan and will not be caught off guard.
What Title Insurance Accomplishes
Home title insurance is a type of insurance policy that secures your home purchase against issues arising specifically with the title to the property. This includes protecting you from losing your home or paying high legal fees to fight a previously unknown heir who is making a claim on the home, as just one of many potential examples. Many new homeowners find themselves in the unfortunate position of purchasing a home only to discover after closing that there were liens on the property, tax issues and other problems that were not revealed until after the deal was done. Without title insurance, homeowners would be responsible for paying these liens and bringing the title back into good standing; otherwise, they may see their home foreclosed on. In this way, title insurance offers crucial protection against issues that may jeopardize your ownership of your home or your financial security.
Why Title Insurance Isn’t Transferable
Unfortunately, a title insurance policy is not transferable. This means that you cannot take on the insurance policy of the homeowner whose residence you are purchasing, and if you previously bought title insurance for your current home, you cannot bring it with you. The reason for this is that when you acquire title insurance, it is done after a thorough examination of the history of the property, including your involvement in it. Title insurance is tied to a specific property, which is why you cannot bring your current title insurance over to a new home. However, the insurance of the existing owner only covers the events that occurred through their own closing on the home. Thus, if you would like to update the property’s history by purchasing it, a new examination and resulting title policy will need to be generated. Some limited circumstances and lenders allow for the continuation of coverage by paying a fee, but your policy will still need to be updated. People can be taken off of a policy without a problem, but adding new people who are purchasing the home requires a new policy.
How To Amend Your Title Insurance Accordingly
You cannot transfer title insurance when you buy a home—that much you know. However, this does not mean that each time you would like to change your title insurance, you’ll need a new policy. Some events are eligible to be added or changed to your policy without interrupting your coverage. For example, you may add a spouse or dependent to your policy without changing your property protection. Similarly, both you and any heirs are protected by a policy, even if you no longer live at the property later.
One important caveat of transferring title insurance is in the case of death. If someone inherits a property, the title insurance that was previously covering the home does also transfer to the new owner. However, this is only true specifically in instances of inheritance; gifting or selling the home to a family member does not allow the title insurance policy to move to them, and a new one will need to be purchased to ensure that coverage continues.
Trust The Experts To Help You Navigate Your Title Insurance Needs
If you are evaluating where you stand in regard to title insurance before you acquire your new home, be sure not to fall into the trap of thinking that you are purchasing the previous owner’s policy as part of the deal. Unless you fall into a few very niche and specific categories, you will need a new policy for yourself. The experts at Mathis Title Company can help you to understand how title insurance works and how to make the best choice for your situation so that you can remain protected for years to come. Reach out to learn more or ask any questions that you have.