Our friends at Independence Title explain title insurance for us:
“Title insurance is very unique compared to other lines of insurance. It does not address hazards that might occur after you buy the property. Instead, title insurance companies search for problems related to past ownership that need to be corrected or excepted from coverage before the property changes hands. In other words, title insurance covers mistakes and unknown factors that may exist prior to closing. The Texas Department of Insurance regulates title companies in Texas and sets fees, so there is no need to “shop” to compare premiums. A title policy premium is a one-time fee – there are no annual renewals like we pay for health, homeowner and auto insurance.
Once a sales contract has been signed by all parties, your title company searches the public records connected with the property and previous owners, going back many years. More than 1/3 of all title searches reveal a title problem that must be addressed before closing. For instance, a previous owner may have had minor construction done on the property but never paid the contractor, or the contractor did not pay his subcontractors, resulting in a lien claim. There may be a lien on the property for unpaid taxes by a previous owner, a missing signature of an heir in a prior transfer of the ownership, or failure to file a release of lien on a past mortgage.
Sometimes title problems occur because of matters that did not appear in the public records. To help protect purchasers in these instances, it is recommended that they obtain an Owner’s Policy of Title Insurance to insure them against unforeseen problems.
Possible hidden title problems can include:
- Errors or omissions in deeds
- Mistakes in examining records
- Undisclosed heir
- Supplemental tax bills
The cost of Owner’s Title insurance, or the “Owner’s Policy,” is based on the sales price of the property. It protects the buyer(s) for as long as they or their heirs have an ownership interest in the property.”
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