When you’re buying a home, buying title insurance to protect your interest in the property against potential claims is important. Find out what you need to know about title insurance and how it works to protect your home.
What You Need To Know About Title Insurance When Buying A Home In The Charlotte Region
When you are buying a home in North Carolina one of the most important decisions you need to make is about purchasing title insurance. If you are financing your home, your lender will require title insurance to cover the amount of the mortgage. Home buyers often confuse title insurance with home owner’s insurance. However, title insurance and home insurance are two totally different things (and clearly you will need both). One big difference is that you pay an annual premium for your homeowner’s insurance, while there are no recurring premiums for title insurance. It’s a one time payment at closing and your home is covered for the duration of your ownership.
What Is Title Insurance?
Title insurance policies insure the condition of the title to your home and your ownership rights to that real estate. If any claims or issues arise after you purchase the home with respect to your ownership, the title insurance policy covers you for those claims. Policies include coverage for your court and attorney fees, as well as reimbursement for actual losses up to the face amount of the policy. Title insurance does not guarantee there are no title defects… it covers your losses against any that might arise after you’ve purchased your home.
Do You Need A Separate, Owner’s Title Insurance Policy?
A mortgage lender’s title insurance policy covers only losses that impact the lender’s interest in your home and only the amount of the loan. So if you’ve put 20% down at purchase, your 20% ownership is not covered under the lender’s policy. To be covered fully you need to buy your own policy.
It’s worth pointing out that in North Carolina you can choose to purchase an “enhanced” title insurance policy, which provides additional coverage at a fairly nominal cost. For example, an enhanced policy would cover covenants and restrictions violations, permit violations, certain encroachments, zoning law violations, amongst other things. So be sure to ask about an enhanced policy. These are not typically offered up front and in my opinion enhanced policies are “cheap insurance.” (No pun intended!)
What Will A Title Insurance Policy Cost?
The State of North Carolina sets the rates for title insurance. This means whoever the provider of the policy is, the rate for the policy should be the same. And quotes are free. Whether you select your carrier or you let your settlement attorney do so, the policy will be put in place by the attorney and you will see the premium as a closing cost line item in your settlement statement.
If you are purchasing a resale home that has already been covered by a policy, be sure to ask the seller or seller’s listing agent who the carrier of their title policy is. That way you can ask for a “re-issue rate” and depending on the age of the policy, you could save several hundred dollars. (Don’t assume you will get a re-issue rate automatically.) When I ask this question, home sellers typically say they have no idea who wrote the policy… but if you go back to the latest HUD-1 or Closing Disclosure on the home from when you purchased or last refinanced, the title insurance company will be listed on the closing statement.
What Else To Know About Your Title Insurance Policy:
You won’t receive a copy of your policy at time of closing. The policies are typically sent to you within 30-60 days after closing. If you don’t receive your policy in the mail within that time frame, call your settlement attorney to help track it down. Keep your policy in a safe place with all your other home purchase and closing documents.
Picture courtesy of anytimestimate.com
THE ABC’S OF A TITLE INSURANCE POLICY
“I always recommend a buyer of real property spend the money to purchase an owner’s title insurance policy. If a buyer is getting a loan to purchase the property, 99% of the time the lender is going to require a lenders title policy, and the buyer can obtain an owner’s policy with little or no additional cost. The buyer only pays an owner’s premium once and it covers them and their heirs as long as they own the property. If an owner refinances, they have to purchase a new policy for their lender, but their policy continues without reissue.
How Do I Get Title Insurance?
A licensed North Carolina closing attorney searches title to the property and provides the title insurance company with an opinion of title. This opinion provides the title company with all pertinent information regarding status of title; who the owner is, what liens are on the property; what taxes are due; description of the property, etc. The title company uses the approved attorney’s opinion to develop the title policy. Once the policy is complete, it is sent to the insured buyer. This policy insures the buyer, subject to the exceptions listed on the policy that they have good title. Because of new legislation in August 2015, title policies are to be issued to the consumer within 30 days of closing. However, under no circumstances should you have to wait more than 60 days to receive your policy.
How Does Title Insurance Work?
A title policy protects the owner or the lender’s investment interest against prior interests or claims to title such as tax liens or an old mortgage or a long lost heir claiming ownership, just to name a few. Unless the policy specifically lists something as an exception on the policy the buyer (and lender) will be covered from these unexpected claims. A title insurance policy is actually an indemnity insurance policy, which means it is technically activated when insured actually suffers a loss or a loss in imminent. However, there is a requirement that the insured notify the title insurance company immediately when they are notified of a title defect or someone claiming an interest in the owner’s property. The notification to the title company is how the insured advise the title company they expect them to step up and protect the policyholder.
How Do I File A Claim? Who Do I Need To notify?
You bought your new home and are served with papers. In a state of confusion and shock, you look through the paperwork and see that you have been noticed of a foreclosure action of a deed of trust which appears to be a former owner, or a claim of lien has been filed because a subcontractor was not paid for her work, or that missing heir wants a piece of the pie. Now what?
- Find your title policy that your closing attorney said to put it with your important documents for your house.
- Read the jacket for the name of your title company and the instructions for how to file a claim.
- Follow the instructions precisely, and send the claim to the listed address on the policy. Be sure to file the claim IN WRITING and keep a copy.
- Follow up in a week with a phone call if you have not been contacted. You have now performed your first and most important duty in preserving your investment by putting the title company on notice.”