The ABCs of a Title Insurance Policy

I always recommend a buyer of real property spend the money to purchase an owner’s title insurance policy.  If a buyer is getting a loan to purchase the property, 99% of the time the lender is going to require a lenders title policy, and the buyer can obtain an owner’s policy with little or no additional cost. The buyer only pays an owner’s premium once and it covers them and their heirs as long as they own the property.  If an owner refinances, they have to purchase a new policy for their lender, but their policy continues without reissue. 

How Do I Get Title Insurance?

A licensed North Carolina closing attorney searches title to the property and provides the title insurance company with an opinion of title.  This opinion provides the title company with all pertinent information regarding status of title; who the owner is, what liens are on the property; what taxes are due; description of the property, etc.  The title company uses the approved attorney’s opinion to develop the title policy.  Once the policy is complete, it is sent to the insured buyer.  This policy insures the buyer, subject to the exceptions listed on the policy that they have good title.  Because of new legislation in August 2015, title policies are to be issued to the consumer within 30 days of closing.  However, under no circumstances should you have to wait more than 60 days to receive your policy. 

How Does it Work?

A title policy protects the owner or the lender’s investment interest against prior interests or claims to title such as tax liens or an old mortgage or a long lost heir claiming ownership, just to name a few.  Unless the policy specifically lists something as an exception on the policy the buyer (and lender) will be covered from these unexpected claims.  A title insurance policy is actually an indemnity insurance policy, which means it is technically activated when insured actually suffers a loss or a loss in imminent.  However, there is a requirement that the insured notify the title insurance company immediately when they are notified of a title defect or someone claiming an interest in the owner’s property.  The notification to the title company is how the insured advise the title company they expect them to step up and protect the policyholder. 

How do I file a claim?  Who do I need to notify? 

You bought your new home and are served with papers. In a state of confusion and shock, you look through the paperwork and see that you have been noticed of a foreclosure action of a deed of trust which appears to be a former owner, or a claim of lien has been filed because a subcontractor was not paid for her work, or that missing heir wants a piece of the pie.  Now what?

  • Find your title policy that your closing attorney said to put it with your important documents for your house.  
  • Read the jacket for the name of your title company and the instructions for how to file a claim. 
  • Follow the instructions precisely, and send the claim to the listed address on the policy.  Be sure to file the claim IN WRITING and keep a copy.  
  • Follow up in a week with a phone call if you have not been contacted.  You have now performed your first and most important duty in preserving your investment by putting the title company on notice.

Published by Christopher T. Salyer on October 24, 2016