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Title Insurance
Lenders vs. Owners

Title Insurance Lenders vs. Owners

Asking the right questions about title insurance may save buyers money when they buy a new home. Try to get a copy of the existing owner's title insurance policy if it was written within the previous ten years. Find out if any discounted rates ("reissue rates") are available if you supply a complete, legible copy of the prior title policy. Discounts of up to 40% may be available on both the owner's policy and lender's policy. A "substitution" rate may be available if the buyers uses the same lender as the previous owner and the same title insurance company; the discount may be as high as 70%.

Fees for title insurance policies are often the largest component of the closing costs for home buyers. A standard policy protects the insured against one of the many title problems that can hinder the transfer of a property (see list below). A one-time premium safeguards the property up tothe amount of the policy and provides defense costs unless specifically excluded.

Many home buyers are confused about the difference between a lender's policy and and owner's policy. A lender's title policy will only cover the lender for the amount that is at risk for the lender, generally not the actual full amount of the purchase price. Virtually every lender in the country requires title insurance for its mortgage loans and its purpose is to protect the lender.

An owner's title policy, on the other hand, is written specifically for the benefit of the owner. The small, additional expense of adding an owner's policy to the purchase made for the benefit of the lender is generally a bargain. The one-time premium covers the property for as long as the owner has an interest in the property. The coverage automatically continues for the benefit of the heirs in the event of a death.

Some of the defects covered by title insurance include, but not limited to:

  • Forged deeds mortgages, satisfaction or releases of mortgages and other instruments.
  • False impersonation of the true owner of the land or of his consort.
  • Instruments executed under fabricated or expired power of attorney (death or insanity of principal).
  • Deeds apparently valid but actually delivered after death of grantor or grantee, or without consent of grantor.
  • Deeds by minors.
  • Outstanding prescriptive rights not of record and not disclosed by survey.
  • Descriptions apprarently but not actually adequate.
  • Duress in execution of instruments.
  • Undisclosed divorce of spouse who conveys as sole heir of deceased consort.
  • Misinterpretation of wills, deed, and other instruments.
  • Claims of creditors against property conveyed by heirs or devisees within prescribed period after owner's death.
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