Title insurance is a form of indemnity insurance designed to protect homeowners from claims dating from before a property was purchased and can help you avoid many different issues. For example, if the previous owner of your home failed to pay property taxes, title insurance can save you from becoming responsible for these payments. However, title insurance is different from other types of insurance in one notable way: it is a one-time payment (typically paid after closing) rather than a sum that is paid on a monthly, semi-annual, or annual basis.
The cost of title insurance varies substantially by state for multiple reasons, including the fact that the services covered by this form of protection vary. Additionally, homeowners in some states may pay attorneys or escrow companies for title insurance.
When Does Title Insurance Protection Begin And End?
Title insurance coverage generally ends on the day the policy is issued and extends backward for an indefinite period of time. This is significantly different from life or auto insurance, both of which shield you against losses that arise from incidents that happen in the future.
It’s important to note that title insurance does not protect your equity in a home, unless you purchase an owner’s policy for your property’s full value.
How Long Is The Property Owner Purchasing Title Insurance Covered?
The simple answer to this question is “indefinitely.” More specifically, title insurance covers you as long as you (or any heirs you have) retain an interest in your property or have an obligation regarding the home. If you sell your property, however, you will likely be required to purchase a new policy.
For instance, if you neglect to pay a contractor for remodeling work and he places a mechanics lien on your property, your title insurance policy will not protect you because the lien was placed after your policy was issued.
Will Title Insurance Protect Me Against False Claims?
Title insurance policies generally do not cover false claims that arise after a home has been purchased. This is unfortunate because many incidents that you have no control over may potentially lower your property’s value after you purchase it. An extended owner’s title insurance policy can protect you against additional liabilities such as structural damages, living trusts, forgeries or encroachments, as well as covenant violations committed by the previous homeowner. If you have any reason to believe you might face any of these issues, it may be a sound idea to purchase an extended owner’s policy.
Do I Need A New Policy When I Refinance?
If you decide to refinance your mortgage, you do not need a new owner’s policy. However, you will be required to buy another lender’s policy, even if you do not switch to a new lending institution. In many states, title insurance companies typically offer discounts to homeowners who refinance. The amount of time for which this discount is accessible varies by state, so be sure to find out what this figure is in your state.
Understand The Importance Of Title Insurance
Title insurance is ultimately important because it can help you avoid costly lawsuits and other legal issues, which may be a source of great anxiety. A property title (e.g. a deed) may be defective for one of several reasons:
- Deed executed under falsified power of attorney
- Deed recorded but not adequately indexed
- Undisclosed judgement or spousal/child support lien
- Undisclosed but recorded boundary
- Incomplete or inaccurate descriptions of the property
- And many other defects
If you decide to re-sell your home in a few years, you may apply for title insurance binder coverage, which can protect both you and the buyer of your property.
Reach Out To A Title Insurance Expert
Speak to the experts at Mathis Title Company in Fairfax, Virginia for more information on title insurance and how long it is valid for. We provide real estate settlement services and legal advice to buyers, sellers, and lenders. Ann Andreatos is a title agent who has over 14 years of experience in the real estate industry and has a remarkable ability to track down lien releases and missing documents.
During the sale and purchase of a home, we will hold the funds being transferred in an escrow account prior to title transfer and closing. After the title order has been approved, we can begin a title search. We work with several trusted underwriting companies to issue a title insurance policy. Your policy is valid for as long as you own your property.