What Exactly Does Title Insurance Cover?
What Does Title Insurance Cover or NOT Cover?
In it's most basic form, title insurance protects from loss against a property due to complications in the property's past. The closing agent in any title insurance deal will take a look at the full history of a property and conduct searches to ensure all taxes, loans, and contracted work have been paid in full and there aren't any current liens against the house. When these complications are presented, title insurance protects the lender or owner against any legal fees they may incur while dealing with the problems.
What Title Insurance Covers
In most cases, title insurance simply protects the owner & lender from being given a faulty deed in regards to their home. This could be caused by illegal forgery or fraud on behalf of the seller, who may have been imitating the rightful owner or didn't have the full rights to sell the home. In other cases, there may have been a conflict with the wills passed down through a generation. This will happen as a result of the will not being properly recorded with the courthouse, therefore causing multiple individuals to think they have a proper ownership claim on the property. In some rare cases, the closing agent isn't able to track down the rightful heir to a property in the event of a death, causing a legal issue with who has claim to the home. As mentioned above, the most common problem to arise with a title is when unpaid liens are discovered, causing trouble when the property is to change ownership. There are many ways to deal with these situations, and it's best to speak with a qualified real estate lawyer if you have any questions or potential problems that you think may arise from your property.
What Title Insurance Doesn't Cover
Contrary to popular belief, having title insurance does not protect you against all issues that arise with home title ownership. Title insurance is only meant to provide protection against any public record issues that arise after the purchase of the home is completed. For example, a contractor may have completed work only a few weeks before the home was sold. Although the money they were owed still hasn't been collected yet, the contractor may not have filed a lien against the property as they were giving the homeowner the benefit of the doubt. Issues will certainly arise down the road as the contractor begins to chase the money rightfully owed to him or her, only to find out the home is no longer owned by the person they originally were hired by to perform the work.
Unless the problem is specifically addressed in the title insurance policy, an unsuspecting buyer won't have title insurance to deal with these liens. Likewise, if a person is occupying some of the property and claims possession with the right to carry on occupancy, and this is not predicated on a file that is recorded, title insurance will provide no protection to the buyer who would like to use the entire property. Title insurance will make a buyer or seller in a situation that is very challenging and expensive and doesn't address this problem.
Taking the time to research the likelihood of any unrecorded claims, claims predicated on occupancy, and assessing with all the right government officials about usability and the legality of the lot can prevent major issues, which may be devastating to development and the possession of property. Be sure to speak with a qualified real estate attorney in Central Illinois if you have any questions or think your property may have potential problems.
Table of Contents
- What is Title Insurance & Why Do I Need it?
- What Does it Mean if My Property Has a Lien Against it?
- The 2 Types of Title Insurance: Lender vs. Owner
- What Exactly Does Title Insurance Cover?
- How Much Does Title Insurance Cost?
- How is Title Insurance Different From Other Types of Insurance?
- Title Insurance FAQ's
- What to Expect at Closing
Brought to you by:
Patrick J. O'Rourke - Attorney at Law
The Best Real Estate Attorney in Bloomington-Normal, Champaign-Urbana, Peoria, Springfield, and Central Illinois