One of the large numbers you see on your HUD-1 sheet at the closing table is title insurance. Many people ask just what is title insurance and why do I have to have it?
Title insurance is an insurance policy that protects the insured against financial loss rising through defects in the title to real property. Before a home is purchased it most likely has gone through several ownership changes, and the land on which it is built went through many more. At any point in that ownership chain there may have been a situation that occurred which can cause a title issue. For example, an owner may have forged a signature in the transfer of title, or there may be unpaid tax or mechanic liens against the property. Title insurance covers the insured party for economic loss that is the result of such title issues, which are known as title “defects”. When the title for a property has been verified as insurable, the title company will guarantee against loss due to any title defects, and pay expenses incurred in defense of any lawsuit which challenges the title.
The premium for title insurance is paid once at the time of closing, and is based upon the purchase price of the property. The insurance protects the insured for as long as they or their heirs maintain an interest in the property. Coverage protects against losses that arose prior to the issuance date of the policy, and ends on the day the policy is issued and extends backwards in time for an indefinite period of time. This is a marked departure from most insurance policies, which protect the insured against future events that occur after the policy is issued.
Insurance is mandatory and required by the lender when purchasing a home that involves a mortgage. The purchase of title insurance is not required when purchasing a property with cash, but it is strongly recommended that the buyer do so.
Title insurance rates are set by the Pennsylvania Insurance Commission, and all policy pricing is uniform across the state. For example, a Wallingford home that is being purchased for the average average 1st quarter price of $287,006, the title insurance would be $1,798.75.
Wallingford PA Real Estate – Wallingford, PA 19086
