WHAT IS TITLE INSURANCE?
Title insurance is an important policy that helps to protect one of your most valuable assets – real estate – from title defects. Title defects can occur from disputed ownership claims, outstanding liens and various other unexpected encumbrances, and without title insurance you’ll be responsible for settling these defects yourself, which can have catastrophic financial consequences.
Title insurance therefore provides protection against claims, losses and legal fees if certain title defects should arise. It’s a type of indemnity insurance that works differently than many other types of insurance in that it covers future claims relating to events that occurred prior to the policy start date. It’s also paid as a one-time premium, rather than ongoing payments.
Are there different types of title insurance?
Yes – there are two types of title insurance: lender’s insurance and owner’s insurance. As the name suggests, lender’s insurance protects the mortgage lender from losses that are a result of title defects. A lender’s title insurance policy doesn’t protect you, the buyer, but it is usually compulsory in order to have your mortgage request granted.
To protect yourself from title defects, you’ll need to take out owner’s title insurance. This is separate from lender’s title insurance and is usually optional, but it is strongly recommended that you take a policy out; otherwise you run the risk of being financially liable for any title defects that may arise at any time in the future. It is also possible for the seller to purchase owner’s title insurance on your behalf.
What does title insurance cover?
Title insurance covers you and/or the lender (depending on the type of policies that you take out) against various title issues. Every policy will differ, but it usually includes:
Outstanding liens (such as unpaid taxes or debt)
Ownership disputes (unknown heir or conflicts relating to a will)
Encumbrances (deed, public record and property survey issues, and fraud or forgery)
Title insurance only covers you for issues that arise from events that occurred before you purchased the property; it won’t cover eminent domain or issues that are a consequence of your own actions. You can find further information about title insurance coverage via our ‘What Does Title Insurance Cover?’ blog.
How much does title insurance cost?
As mentioned above, title insurance is a one-time premium that’s usually paid during closing. The cost of title insurance varies between states and is usually influenced by the purchase or mortgage price. To give you an estimate of the potential cost, Fidelity National Title Insurance Company has created a useful rate calculator for the state of Arkansas, which is completely free to use.
How do you take out title insurance?
Through a policy agent such as Jackson Title! Jackson Title is a highly experienced policy issuing agent for commercial and residential title business, working with Fidelity National Title Insurance Company underwriters. In order to provide title protection, Jackson Title will undertake an extensive search and examination of public records to identify any defects that are tied to the real estate in question. Any defects will then be resolved before the title policy is issued, or they will be excepted from the coverage.
For more information and guidance regarding title insurance, please don’t hesitate to contact Jackson Title.