A home often represents most people’s largest investment. Therefore, it’s important to protect your home as much as possible. Issues with a property can arise even after you have purchased it. Consequently, it is highly recommended that you obtain insurance to resolve claims related to these problems. One of the many forms of protection you can acquire for your home is title insurance. Here is a close look at what this is.
What Is Title Insurance?
Title insurance is a form of indemnity insurance designed to protect both homeowners and mortgage lenders from issues associated with the title to a property, which are known as “defects.” A title is a document that proves you legally own a property. This is different from a deed, which is a document used for the transfer-of-ownership process when you decide to sell your home. Title insurance is also different from a title commitment, which is a title company’s promise to issue insurance as long as the homeowner meets certain conditions.
How Does Title Insurance Work?
The process of obtaining insurance typically consists of two steps. First, the title company conducts a title search to ensure that the home you wish to buy has a clean title. Should the company notice any defects, it will notify you. After the company has confirmed the title is clean, the underwriting process can begin. The company will then offer you a quote for a policy based on the risks it carries. Keep in mind, however, that most title companies will refuse to offer a quote if a title is filled with defects, at least until these issues are resolved.
Do You Need Title Insurance?
Many lenders require homebuyers to obtain a insurance policy that shields the former, known as lender’s title insurance. The exact laws regarding who pays for insurance and closing costs vary by state. (In certain states, this is negotiable.) Additionally, it is highly advisable to purchase insurance because without this type of protection, you may become responsible for property taxes that your home’s previous owner neglected to pay.
How Long A Title Insurance Policy Lasts
The duration for which a title insurance policy is valid generally depends on the type of policy you have. Let’s analyze this for both the lender’s and owner’s policies.
If You Have A Lender’s Policy
A lender’s insurance policy typically lasts until your mortgage loan has been paid in full. Lender’s insurance is frequently required in order to receive a mortgage because the lending institution faces risk simply by providing a loan for a property whose title may be defective due to mechanics liens (for unpaid construction work), unrecorded easements, encumbrances, property restrictions, and other issues.
If You Have An Owner’s Policy
An owner’s insurance policy is valid for as long as you or your heirs maintain an interest in your property. This type of policy will shield you from lawsuits by third parties who suggest that claims were filed against your home before you purchased it. An extended owner’s policy can protect you from additional liabilities such as encroachments, forgeries, structural damages, living trusts, and previous ownership covenant violations.
Do You Need To Renew Your Policy?
Unlike other forms of insurance, which are paid monthly, annually, or semi-annually, insurance is a one-time payment typically made upon closing on a property. You will only need to pay an additional sum if you later decide to add coverage. It’s also important to know that coverage could potentially last forever for title warranties made upon selling your home. For this reason, it is recommended that you do not cancel your insurance policy, even if you decide to sell your property or transfer the title.
Talk With The Experts For More Info On How Long Does Title Insurance Last
Reach out to the professionals at Mathis Title Company for more information about how long title insurance lasts. We are dedicated to providing insurance and other real estate services to homeowners throughout Northern Virginia. Our extensive legal background helps us give expert advice to buyers, sellers, and lenders.
If you have recently purchased a property, it is highly recommended that you obtain insurance. In Virginia, homebuyers are responsible for paying insurance costs. This type of protection is essential to resolving title defects such as unpaid taxes, mechanics liens, encumbrances, property restrictions, and unrecorded easements. If you decide to re-sell your home within a few years, you may apply for insurance binder coverage. This policy addition is valid for two years.