This section of our website will give you answers to questions that we frequently get from home buyers.
Q: What is Title insurance?
A: Title insurance is unlike other types of insurance. Title insurance is designed to protect you from incidents in the past. This is unique because most insurance protects you from future events. In addition with Title insurance you only make one payment. There are no yearly or monthly fees with Title insurance.
Q: What are some common title defects?
A: Below you will find a list of the most common hidden risks that can cause a loss of title or create an encumbrance on your Title:
- Mistakes in recording legal documents
- Undisclosed or missing heirs
- Liens for unpaid estate, inheritance, income or gift taxes
- Fraud
- Forged deed, releases or wills
- Misinterpretations of wills
- Deeds by persons of unsound mind, by minors or by persons supposedly single, but in fact married
- False impersonation of the true owner of the property
- Instruments executed under invalid or expired power of attorney
Title insurance protects you from claims arising from any one of these events if the event took place before you bought the property.
Q: What are the different types of Title policies?
A: Anyone who has a financial interest in the property should have title insurance. On most residential properties, there are two parties who need coverage: the lender and the homeowner. The lender needs protection only for the amount of the loan. The face amount of the lender’s policy decreases as you pay down the mortgage. As the homeowner, you should have an owner’s policy for the purchase price of the home. It’s a good idea to talk to your attorney about your title protection. Ask whether or not it makes sense to add a survey endorsement or an inflation rider to your owner’s policy. And, be sure to read the title binder before the policy is issued to find out what restrictions apply.
Q: Am I required by law to have Title insurance?
A: Actually, you are not required by law to have Title insurance. Keep in mind that Title insurance protects you from events that have happened in the past and if for some reason you do have a defective Title you are opening yourself up to the potential of huge personal loss. If you have a mortgage on the property the lender almost always requires you to buy a loan policy to protect their interests.
Q: So, if you do your job so well then why do I need Title insurance?
A: You purchase Title insurance to protect your right of ownership from any legal challenges that may arise because of erroneous or illegal transfer of Title before you bought the property. Title Insurance will cover your legal cost and the cost of any related judgement - up to the limit allowed by your policy. This is why we do our job well. We are entrusted with making sure your Title is clear before you make a purchase. Title insurance exists for the rare occasion that we may have not been able to spot a potential problem.
Q: Are there any options available on Title insurance policies?
A: Most commonly homeowner's request a Survey endorsement. The Survey endorsement states that the property is covered as described in the survey and only excludes the things that were specifically excluded in the survey.
Q: Does the amount of coverage I have go up as my property value goes up?
A: The coverage amount does not increase with the market value. There maybe a cost of living adjustment in your basic policy, but if you want additional coverage you should consider purchasing an inflation rider for your policy.
Q: How much does Title insurance cost?
A: In New Jersey the rates are set by the State. That means that the premium or cost of coverage does not vary from agency to agency. Don't forget that you might be eligible for a reissue rate depending on the age of the current policy and other factors. In addition to the title insurance premiums there are often local fees for recording documents.
Q: Who pays for Title insurance?
A: In most cases the buyer pays for the insurance premium on the owner's policy and the lender's policy. The insurance premium is part of the closing costs. In New Jersey the lender's policy cost is only a nominal fee added to the owner's premium.
