31 Aug Title Insurance: A Unique Policy Protecting the Past Rather than the Future
Title insurance is something people don’t usually hear about until they decide to buy a home. It’s a unique type of insurance because unlike most policies where you pay to protect against incidences that will happen in the future, your title insurance policy actually protects you against things that occurred in the past.
Title issues are not limited to just the current home seller’s actions, but also any of the property’s previous owners. While your title search will uncover possible issues prior to the real estate closing, you never want to buy a home without receiving a title policy just in case a title issue arises later.
Costly Unpaid Liens
A lien is often an unpaid bill which is associated with or attaches to a property. There are many types of liens that might show up on your title search, including:
- Unpaid contractor work on your home
- Condos with Homeowners Association (HOA) liens on outstanding dues or fines incurred due to rule-breaking or unpaid assessments
- County Department of Revenue Liens for unpaid property taxes
While a title search uncovers any liens, it’s always possible that issues might arise following your home purchase. Your title policy will protect and defend your good title to the property!
Heirs Claiming Ownership
This unexpected occurrence is rare, as the title insurance company, working with the seller and the seller’s attorney, obtains documentation of the decedent’s heirship to avoid this issue. The seller often completes and signs an “Affidavit of Heirship” questionnaire, or a probate court proceeding may be required to establish the decedent’s heirship.
This may leave home buyers open to an unknown beneficiary claiming an ownership interest in the property. The home seller might legitimately believe they identified all the heirs and have the right to sell the property. In these cases, your title insurance policy will protect and defend your good title!
As you can see, title insurance is backward-looking. Your title policy will protect you from any unwanted skeletons found in the closet of your new home!