Unlike auto or homeownersinsurance, Title Insurancecoverageperiods end on the day they are issued and extendbackwardin time, yet a policy'sprotectionperiod extendsforwardand stays in place until the property is sold to a new owner. Title Insurance protects property owners against future claims based on what could have already happened before they bought (prior acts by previous owners).

Because it is so misunderstood, many buyers look at Title Insurance as just another vague (and possibly unnecessary) expense they have to pay at closing. Let's discuss this today.

Owning real estate is about therightsan owner may exercise concerning the use, occupancy, and disposition (resale) of property. These rights are transferred each time the property is sold to a new owner.

Title

A general concept that expresses the ownership of something. It refers to an understanding and acceptance of the owner's rights.

Deed

The written document that specifically describes and acknowledges ownership of real property. Deeds are recorded in the County where the property is located.

Depending on the location and type of property, the history of owners may go back a couple hundred years. This is especially true in olderUS cities and towns whose histories may go back to the 1700s.

It is very important to note that the title issues we're discussing today attach to the property, not to individual owners. Undiscovered title defects remain with the property through all ownership transfers until they are found and resolved.

Title Insuranceprotectscurrentowners againstfuturetitle problems resultingfromthe actions ofpreviousowners.

Challenges to an owner's full right and ability to sell a property might come from:

• Improper boundaries from an inaccurate survey
• Buildings encroaching on easements, setbacks,or lot lines
• Open and unresolved building permits
• Delinquent taxes, unsatisfied mortgages, foreclosures started
• Errors in identification of property or buyer/seller
• Previous owner's spouse, ex-spouse, or heirs claim ownership
• Outstandinglegal judgement againstowner attaches to property
• Liens seeking payment- property repairs, unpaid spousal / child support, COA/HOA assessments

Problems such as these that can prevent or restrict an owner's ability to legally use, occupy, or sell the property are title defects,also called "clouds" on the title. Many title defects or encumbrances are found in public-record documents such as liens, court judgements, and mortgages. Like deeds, these are recorded with the County where the property is located.

Often, there are also unrecorded title issues that will derail a closing. These are found in building/zoning department and other third-party files, not just the legally recorded documents. Common examples of these are municipal code violations and fines, unpaid utility bills, Owners Association charges, and open building permits.

In a Title Searchearlier deeds, court records, property indexes, municipal records, and other sources of information (both recorded and unrecorded) areclosely examined to reveal any possible ownership defects, encumbrances, and restrictions thatmay have attached to the property.

Any of thesecould prevent thecurrent ownerfrom legally and freely selling the property.They could alsolimit theanticipated future use of the property by a new owner.

Most defects found in a Title Search can be legally "cured" by the title company or settlement attorney and their legal staff prior to closing.

Once the title company or closing attorney's office is satisfied that a property hasclear title(no unresolved defects), a Title Insurance commitment and policy may be issued which will protect the newowner from problems that may arise from thekind of title complications mentioned above.

So...iftitle agentsand attorneys havealready checked for title defects, why is insurance needed?

Because even with a careful and diligent Title Search, there may behidden hazardsfrom the past that can affect both the seller's right to transfer and the new owner's future property rights.

Such hidden hazards may include:

• Forged documents, fraud, or other criminal acts
• Mentally incompetent previous owner
• Improper trustee, corporate officer, or LLC member authorization to sell
• Seller entered into contracts with multiple buyers
• Inaccurate property description; deed transfer issues
• Undeclared marital status, unknown Florida Homestead claimant
• Similar or identical owner names (unrelated, Sr, Jr)
• Probate issues, undisclosed heirs, unknown wills

Owners Title Insurance isnotrequired in Florida, though buying real property without it can be taking on significant unseen risk.

An Owner's Title Insurance policy does not protect current owners fromtitle or deed issuesthat attach to the property caused bytheir ownactions during their time of ownership. (Remember - the coverage period extendsbackwardfrom the issue date)

In any Title Insurance policy, there are some exclusions that are NOT covered. A good example of this might be excluding challenges to lot lines if a new survey was not performed as part of the purchase. It isveryimportant for buyers to fully understand any exceptions and exclusions in their new Owners Title Insurance policy.

An Owners policyis for the full value of thereal estate purchase and lasts as long as the current insured owners or their heirs have an uninterrupted ownership interest in the property.

If a claim against ownership arises, the Title Insurance company is there toaddress any legitimate title defects and valid claims against legal transfer not found/addressed in the Title Search, and to cover the costs of defending the owner/policyholder's property rights.

Title Insurance premiums are a one-time, single payment madeat closing. In Florida, local practice and contract details determine whether the seller or buyer pays the new Owners Title Insurance premium at closing.

Whenthere is mortgage financing on the purchase,lendersalso want to be protected from errors, defects, and adverse claims to ownership, sothey require a separate Lender's Title Insurance policy. A Lender's policy carries an additional separate premium when written along with the owners policy, and has different coverage amounts and terms. Borrowing buyers are responsible for paying the Lenders Title Insurance premium.

There we are - a brief and general overview of Title Insurance and its place in a real estate deal.

For more detailed information and applicability to specific situations- speak with a Florida-licensedreal estateattorney.

For any of your real estate needs, please call me, Marie McLaughlin 727-858-7569.

Source:https://thefloridarealestateblog.com/f/insurance-coverage-that-ends-the-day-you-buy-it