Some property Buyers and Sellers don’t fully understand what title insurance is, and why it’s necessary (or, in some cases, required). We can understand why. Title insurance is not a topic that gets much attention in the real estate world.
This lack of information leaves room for misconceptions about title insurance. As title insurance experts, we’d like to dispel a few of these misconceptions below.
1. Title Insurance Charges Annual Premiums
Unlike hazard insurance, title insurance does not require annual, ongoing premium payments. Buyers and/or Sellers pay for title insurance once — at closing of the property. Title insurance coverage lasts as long as the new Buyer owns the property. Even if 30 years pass before a title dispute arises, the title insurance coverage still protects the purchaser/owner of the property.
2. The Lender’s Title Policy Protects the Owner
A lender’s title insurance policy covers only the lender. If a title dispute arises, the lender’s policy will protect the lender’s investment (i.e. the loan amount) in your property. It won’t protect your down payment or the equity you’ve built. That’s why we recommend Buyers opt to purchase their own policy (called an Owner’s Policy).
3. Cash Buyers Don’t Need Title Insurance
Since there’s no lender involved, cash buyers don’t purchase a lender’s title insurance policy. But, if a Buyer wants to protect their property investment, cash buyers do need an owner’s title insurance policy. While the purchase of an owner’s title policy is not required in a cash transaction, it is highly recommended, as this one-time fee can save you tens (or hundreds) of thousands in the event a title dispute or unrecorded mortgage arises in the future.
4. Homeowners Insurance Can Protect Against Title Disputes
Homeowners insurance helps protect the value of a property after an external peril causes damage — perils such as hurricanes, storms, or fires. Title disputes don’t fall into this category. For example, if an unknown heir of a previous owner comes forward and claims inheritance rights to your property, homeowners insurance won’t help. Only title insurance coverage can help.
5. Title Insurance is an Expensive Luxury
As consumers, we’ve all been offered warranties and protection plans we don’t want or need. A lot of us instinctively resist these upsells. But title insurance isn’t an unnecessary upsell. If someone came forward with a legitimate claim of ownership on your new property, your entire real estate investment could be in jeopardy. Title insurance could shield you from taking a huge loss.
Regarding the cost: Most state insurance commissions oversee title insurance companies to make sure buyers and sellers pay fair rates. In Florida, the State sets title insurance rates but also allows title insurance companies to rebate part of the premium that the agency earns.
At Butler Title, we issue that rebate to every client, whether or not they ask for it. We do this because we believe every client should have the best protection at the most affordable cost.
Contact us today to schedule your next closing at one of our South Florida offices.
Butler Title is a full-service, attorney owned and operated title insurance agency. We keep it simple and focus on what we do best: real estate closings. From first-time buyers to local moguls, BT provides an industry-leading fee structure and unparalleled experience.
P: 954.616.8735 F: 954.206.1097