Why I Need Title Insurance
Purchasing an owner’s title insurance policy is a matter of being safe rather than sorry. Different from other insurance policies that protect against possible future events, the owner’s title insurance policy protects you against events that occurred in the past. Errors that could impact or threaten your ownership rights are numerous and could include: recording and survey errors, unknown creditors and fraud. These defects usually present themselves years after the property is purchased and could result in, at the very least, legal fees. In a worst case scenario, it could lead to the loss of your property, the equity you established and your down payment.
In a litigious society, it makes sense to protect the biggest investment you will make in your lifetime.
What is title insurance?
Title insurance insures against financial loss caused by defects in title to real estate. Title insurance companies defend against lawsuits attacking the title, or in the case of a covered loss, reimburse the insured up to the policy limit.
Why do I need title insurance?
When you buy a home, or any property for that matter, you expect to enjoy certain benefits from ownership. For example, you expect to be able to occupy and use the property as you wish, to be free from debts or obligations not created or agreed to by you, and to be able to freely sell or pledge your property as security for a loan. Title insurance is designed to cover these rights you bargain for.
What kinds of defects does title insurance protect you from?
It protects you against loss due to title defects, liens, or other similar matters. Title insurance protects you from claims of ownership by other parties. It protects you against losses from problems that arose before you bought the property. The title company will defend you in court if there is a claim against your property and will pay for covered losses.
Some common examples of problems covered by title insurance include:
- Improper execution of documents
- Mistakes in recording of legal documents
- Mistakes in the indexing of legal documents
- Mistakes in legal descriptions of property
- Forgeries and fraud
- Undisclosed or missing heirs
- Unpaid taxes and assessments
- Unpaid judgments and liens
- Unreleased mortgages
- Incorrect interpretation of wills
- Mental incompetence of grantors of property
- Impersonation of the true owners of the land by fraudulent persons
- Fraud in securing essential signatures
- Refusal of lender to provide financing based upon condition of title
- Refusal of potential purchaser to accept title based upon condition of title
Is it required?
Mississippi does not require title insurance. However, if you obtain a loan to purchase property, the lender will require you to buy a Loan Policy of Title Insurance to protect their interest.
How long does it last?
A loan policy lasts until the loan is paid off. An owner’s policy lasts as long as you or your heirs own the land. It also may provide warrantor’s coverage after you no longer own the property, depending on your policy provisions. Policy language has changed over time, so read the continuation of coverage provisions in your policy carefully to determine coverage terms.
Do you have to renew your policy?
You pay for title insurance only once, when you buy the policy, unless you decide later to add more coverage. Keep your policy, even if you transfer your title or sell the property. Coverage lasts as long as you or your heirs own the land, and may last forever for any title warranties made when you sell the property.
What happens if I transfer my title to my business, my trust, my LLC, or my children?
Depending on the type of policy you have, it may not provide coverage when you transfer your title into your business or to someone else that is not considered an insured. To determine what type of coverage you have, read your policy, check with your title agent, or speak with an attorney.
What’s the difference between a title commitment and a title policy?
The title commitment comes before closing; the title policy is issued after closing. The commitment says that a title company is willing to issue title insurance under certain conditions and if the seller fixes certain problems. The policy provides coverage for the property.
What does the title commitment do?
The title commitment lists any potential issues, exclusions, or exceptions. It alerts the buyer to issues that exist and could cause problems in the future. It does not guarantee that there are no current issues or that none will arise in the future. You should discuss how to clear potential issues with the title agent. You may wish to review potential issues with a lawyer.
You should read the title commitment carefully as these items can become exclusions or exceptions under Schedule B of your policy. Exceptions and exclusions are items not covered by the policy.
What types of polices are there?
There are two types of policies, the owner’s policy, and a loan policy.
The owner’s policy protects you against losses from ownership problems that arose before you bought the property, but that were not known at the time you bought the property. For example, you could lose the title to your property due to fraud, errors or omissions in previous deeds, or forgery of a previous deed. The owner’s policy protects the buyer from the covered risks listed in the policy.
The loan policy is issued to the mortgage lender. It protects the lender’s interest in the property until the borrower pays off the mortgage. For a complete list of covered risks, see the Covered Risks section of the Loan Policy.
Why do I need a loan policy?
Most lenders will require a loan policy as a condition of the mortgage. The policy will repay the balance of your mortgage if a claim against your property voids your title. A loan policy covers up to the amount of the principal on your loan.
How long does the loan policy last?
Loan policies remain in effect until you repay the loan. Most lenders will require you to buy a new loan policy if you refinance your home. When the new loan pays off the existing loan, the old loan policy expires.
Why does my owner’s policy cost more than the loan policy?
When you buy an owner’s policy and a loan policy at the same time, the loan policy is issued at a discounted price of $100. This is referred to as a “simultaneous issue.” If you decide not to purchase an owner’s policy, you will pay full price for the loan policy.
Do I get a discount if I refinance?
Yes, if you refinance. However, the premium discount may vary depending on the amount of time that has elapsed and the title insurer.
Is there a way to save money on my closing?
You can shop around for cheaper escrow fees or closing costs. These differ between agents.
What if my home increases in value? Am I still covered?
You are covered for the value of your policy. If you add improvements to your home, or if your home increases in value over time, you can buy an increased value endorsement to cover the increase in your property’s value.
Do title companies charge the same policy premiums?
No. Title insurance rates are not regulated in Mississippi. All title companies will charge their own premium for a policy. Rates are based on the property’s sale value or loan value. However, the difference in rates charged by most Mississippi title insurers is negligible.
Who do I buy a title policy from?
You should always buy from a licensed company. It’s illegal to sell title insurance without a license in Mississippi. If you buy from an unlicensed company, your claims could go unpaid.
To verify that a company is licensed, call the Mississippi Consumer Help Line at 1-800-252-3439. You can also check online.
Do I get to pick my own title company?
You may choose any title company you want; you don’t have to use a company selected by a real estate agent, builder, or lender.
Section 9 of the Real Estate Settlement Procedures Act (RESPA) prohibits sellers from conditioning the home sale on the use of a specific title insurance company. You may contact the Consumer Financial Protection Bureau, who regulates RESPA, if you have a complaint.
What is a title defect?
A title defect is anything that can cause a title to be considered invalid or defective in some way. Some examples are:
- Invalid documents due to forgery, fraud, undue influence, duress, incompetency, incapacity, or impersonation.
- Failure of any person or entity to have authorized a transfer or conveyance.
- A document affecting title that is not properly executed, signed, witnessed, notarized, or delivered.
- Undisclosed or unrecorded easements not otherwise apparent on your land.
- No right of access to and from the land.
- A document executed under a falsified, expired, or otherwise invalid power of attorney.
- A document not properly filed, recorded, or indexed in the public records.
- Ownership claims by undisclosed or missing heirs.
- Defect arising from an improper prior foreclosure.
- Undisclosed restrictive covenants affecting your property.
Lien issues can also cause title defects. Some examples of lien issues are:
- Any statutory or constitutional contractor’s, mechanic’s, or materialman’s lien for labor or materials that began on or before the policy date. Talk to an attorney about your rights.
- Lien for labor or materials furnished by a contractor without your consent.
- A previous owner failed to pay
- a mortgage or deed of trust
- a judgment, tax, or special assessment
- a charge by a homeowner or condominium association.
- Other liens or claims that may exist against your title that are not listed in the policy.
Notify your title company immediately if someone files a lien or claims an interest in your property. Failure to do so could jeopardize your claim. Contact the underwriter listed on the policy and follow their claim-filing procedures.
What doesn’t a title policy cover?
A title policy generally won’t cover mistakes or defects, financial issues, or rights issues.
- Defects that are created after the policy is issued.
- Defects that you create, or of which you had knowledge.
- Problems that arise because of your failure to pay your mortgage, or to obey applicable laws or restrictive covenants that were disclosed to you.
- Certain taxes and assessments.
- Losses resulting from rights claimed by someone else occupying the land. The title company may need to inspect the property. There may be a charge for the inspection.
- Homestead or survivorship rights of a policyholder’s spouse. Mississippi homestead laws address the rights of a spouse or survivors of a property owner.
- Claims from other people who may have certain rights if your property is near a body of water or has a river or stream flowing through it.
- Condemned land, unless a condemnation notice appeared in the public record on the policy date or the condemnation occurred before the policy date.
- Violations of building and zoning ordinances and other laws and regulations related to land use, land improvements, land division, and environmental protection.
- Disclosed restrictive covenants limiting how you may use the property. Request copies of restrictions and have your attorney explain them.