What is title insurance?

Do I always need title insurance?

Do all title companies charge the same amount for a closing?
What does that mean?

Ask a Question of Your Own . . .

What is title insurance?

 You’ve heard the story about the man who tried to sell the Brooklyn Bridge to anyone willing to pay the asking price.  As a shrewd purchaser you would insist on getting insurance through a company that not only guarantees that the man really owns the bridge, but that there were no mortgages, liens, or other liabilities that would crop up after money changed hands and you became the proud owner of the bridge.  Later, if someone came out of the woodwork and said the man had already sold him the bridge, there was a defect in the chain of title, or if a mortgage company, contractor, or lien holder said you owed money or started a foreclosure case against you, title insurance ensures you would not suffer a loss, and provides a legal defense on your behalf.  Because title insurance provides valuable protection to you from many different kinds of loss that can threaten your ownership rights to  property you buy, lenders almost always require you to obtain title insurance before they will loan money for your purchase. 

Do I always need title insurance?

We still live in a free country.  There is no law that says you must always get title insurance when you buy property.  Then again, there is no law that says you must have health insurance, flood insurance, homeowners or other kinds of insurance that you should have.  If you intend to borrow money to buy the property, your lender will require you to have title insurance (in addition to homeowners, flood and windstorm insurance) to protect their interest in the property, as well as your own.  But even if you pay cash for property and no one is forcing you to get title insurance, you place yourself at risk by not insuring your investment, especially given the low cost of this type of insurance.  There may be special circumstances in a given transaction where the risk of not insuring title is so low that you may choose not to get title insurance.  Even then, have a competent title company or attorney do a title search on the property and advise you of the risks involved.  

Do all title companies charge the same amount for a closing?

The short answer: yes and no.  Title insurance is regulated by state law and title companies are under the jurisdiction of the Florida Department of Financial Services.  The rates charged for title insurance are set by regulation based on the amount of coverage for the owner and lender and the types of coverage provided, and all title companies must adhere to these regulations.  You will also pay the same for taxes on the deed and mortgage.  But while the amount of title insurance you are quoted from title companies should be the same, other charges for your closing can vary.  These include the cost for a title search, title examination, the closing fee, document preparation fees, and charges for wire transfers and courier expenses.  Feel free to shop around and get quotes from different title companies, and don’t be afraid to ask for a discount on closing fees or other charges other than title insurance.

What does that mean?

Title Search: Search of official records to identify the person or persons who hold legal title to real property and encumbrances that exists on that property, including mortgages, liens, judgments, easements, declarations of homeowner associations or condominiums and many other matters that effect ownership of the land.  The title search comes in the form of a report and forms the basis of a title commitment.  A search can be ordered without ordering a commitment and title policy in which case it is called an Owner's and Encumbrances (O&E) report.

Title Examination: A review of the title search and examination of the items on the report to determine what requirements must be met to clear the title of unacceptable encumbrances and legally transfer title to the new owners, how to meet those requirements, and resolve any other issues concerning title to the property. 

Title Commitment: A written promise issued by a title insurance company that the new owner of real property will be guaranteed legal ownership of that property so long as certain requirements are met (such as that a properly executed deed is delivered and recorded) subject to certain exceptions (such as easements and future taxes) and that a title policy will be issued to that effect after the closing.  A commitment can be for when title to property is being passed in a purchase and sale, or for a mortgage that is to be recorded on land. 

Title Insurance: A written guarantee, in the form of a policy issued by a title insurance company, that the new owner of property holds legal title to that property free of the claims of any other person up to the date the new owner took title to the land, subject to certain exceptions listed on the policy (such as easements, plat restrictions, declarations of homeowner associations and other items).  In addition to insuring that the deed to land vests title in the owner of the land, a policy may also be issued to insure a lender's mortgage on the land.