Title insurance is one of the costs that buyers will incur when buying a home with or without a mortgage loan. Mortgage lenders require buyers to get lender title insurance as a condition to making the loan. Lender title insurance protects the lender if any title problem arises post-closing that jeopardizes the lender’s ability to have the loan repaid.
The buyer pays the premiums on lender title insurance at the time of closing. If the buyer wants title insurance to protect the buyer’s ownership interests, the buyer can buy it at the time of closing or later on; though buying it later does incur additional costs.
Types of Title Insurance and Frequency of Payments
Lenders Title Insurance
Lenders title insurance premiums are paid by the buyer at the time of closing on the sale. The buyer makes a one-time payment for the insurance premium at the closing, and the lenders title insurance becomes effective at the time the title is transferred. Buying lenders title insurance is different from buying other insurance because title insurance is acquired in a single payment, as contrasted with other types of insurance that most people have where the premiums are paid monthly, quarterly, or annually.
Once the buyer has purchased the lender’s title insurance, the insurance policy lasts for as long as the lender has the outstanding mortgage. If the buyer keeps the property until the lender is paid in full, the title insurance will terminate once the buyer has paid off the loan.
When a property owner refinances the mortgage loan, the property owner will take out a new loan to replace it. The existing lenders title policy will terminate at the time the original loan is refinanced. The property owner will have to buy a new lenders title insurance policy at the time of closing on the new loan.
Owners Title Insurance
Lenders title insurance only protects the lender. It does not protect the owner of the property against competing claims of ownership to the property. If someone asserts an interest in the property based on an inheritance claim under a will, or a contractor or taxing authority asserts a valid unpaid lien on the property, the owner will incur the costs of defending against those claims and the owner’s ownership rights could be at risk.
Property owners can protect themselves against those risks by buying owners title insurance. It is available to property owners whether there is an outstanding mortgage on the property or whether the owner holds the title free and clear of any mortgage loan.
A property owner can buy owners title insurance at the time of closing or any time thereafter. The premium is paid in a single payment.
A property owner can buy title insurance at the time or closing or any time afterward. Regardless of when the owner buys a policy, the policy will become effective retroactively beginning at the time the property owner acquired title to the property. Owners title insurance is unique in that regard—most other types of insurance only protect you against problems that arise after you buy the insurance policy.
Extended Owners Policy
Some property owners want more coverage than what is available under a basic owner’s title insurance policy. In those cases, the property owner may want to consider purchasing an extended owner’s policy, which protects the property owner against other types of title issues, such as encroachments or forgeries that occur after the policy is issued, along with other issues arising out of covenant violations by a prior owner, claims based on living trusts, and other legal issues that adversely affect the owner’s property interests.
Benefits of Owners Title Insurance
The benefits of buying an owner’s title insurance policy are clear.
Most important, owners title insurance protects the owner’s (rather than the lender’s) interest in the property. It will cover the owner’s cost of defending against claims and lawsuits by a third party based on claims to the property that arose before the owner purchased the property. The cost of litigation can be significant, while the cost of title insurance is small in comparison.
Also, an owner’s policy lasts for the entire time you own the property. That means if you have owned the property for 30 years and decide to sell it next year, your policy will end when you close on the sale.
If you die while you still own the property, your title policy transfers to your spouse or children. The title policy will remain in effect for as long as your spouse or children own the property.
Contact Mathis Title Company for More Information about Title Insurance
Mathis Title Company wants to help you with your closing and provide the title insurance coverage that you need. Mathis Title is a proven title company in Virginia with the legal expertise needed to provide great service to its many satisfied clients. Their title experts handle many thousands of closings each year and are available to help you with your closing or any title issues you are facing.