Buyers, sellers and owners of real estate often have some difficulty understanding the purpose of title insurance and the coverage that it provides. A critically important component of any real estate transaction, the value of title insurance is maximized when it is understood correctly. The following provides a brief overview of some key principles:
What is Title Insurance? At its core, title insurance provides information to a buyer regarding the property they are going to purchase. It essentially lets the buyer know what they are buying. Title insurance looks backward, letting the buyer know what sorts of restrictions, ownership issues, easements or liens may exist with respect to the property.
What Does Title Insurance NOT Protect Against? A title insurance policy does not protect a buyer against all potential problems or issues regarding the property. Title insurance does not insure that there are no problems with the title to the property. Instead, it discloses property issues, and then insures that there are not any other relevant problems or concerns, besides the named items. Furthermore, a title policy does not protect the buyer against any issues or problems that may arise in the future—it does not look forward, so to speak.
When is Title Insurance Necessary? A title insurance policy is advisable in nearly every real estate transaction, both commercial and residential. A buyer, no matter the nature of the transaction, has a vested interest in knowing what they are buying and obtaining some protection against any undisclosed problems that are later discovered. Our firm recommends title insurance in nearly every real estate transaction. Some exceptions would include certain types of intra-family transfers or some transfers made in conjunction with estate planning.
Who Is Responsible for Obtaining Title Insurance? A buyer is typically responsible for ordering and paying for title insurance. This makes good sense, as the buyer is being protected by the policy.
How Much Does Title Insurance Cost? The cost of a title insurance policy is based on numerous factors. In addition to other fees charged by the title company in conjunction with a closing, the premium on a title policy is typically around $1 for each $1000 of insured value. Accordingly, the typical premium on a $1million commercial property would be about $1000. The cost for a policy on a $100,000 residential property would be about $130.