Is Title Insurance Truly Necessary?
Real estate represents one of the single largest investments you will ever make. Obviously, an investment of this magnitude demands the utmost in protection in order to ensure your rights and interests in the property remain unscathed. Title insurance helps ensure that your rights and interests are exactly as you expect. In addition, it helps ensure a smooth transfer of the ownership title and protects you against any future claims that might be laid against the property in question. When it comes to protecting your rights, title insurance is the most effective, least expensive and most accepted method available.
Because land is not a "consumable," numerous people can have rights to a single piece of property. This is because land endures over the course of many generations. Your rights as the owner, as well as the rights of your family and any heirs you have can be quite difficult to define because of this. Government agencies, public utilities, private contractors, a variety of lenders and other parties may also have some rights to your property.
While other states utilize attorneys to handle real estate transactions, in Arizona, title companies handle these types of transactions. While those involved in the transaction certainly have the right to enlist the aid of an attorney, it is a rare occurrence and usually not necessary, particularly in a residential real estate transaction.
The title company handling your transaction will perform an extensive search of all documents related to the property prior to the close of your contract. Through examining these records, the title company can ensure that you will have a "free and clear" title. Experienced title officers will examine the documents and determine the status of ownership. Finally, you and your agent will receive a full report of the title company's findings.
Why do you need title insurance if the title company handles all the legwork involved? Actually, even after the most thorough search possible, title flaws can still exist and can plague you. Common flaws found in titles can include invalid court proceedings, forgery, incorrect legal interpretations, confusion caused by similar names on the title, unrecognized rights of previous heirs or family and even defective deeds. These "hidden" problems can rear their ugly heads at any point in the future, which is why you need title insurance to protect your rights and interests.
Your title insurance policy protects you against these disparate threats once your transaction has been completed. You will find two common types of title insurance, as well. An owner's policy protects you for the full purchase price of the real estate, while a lender's policy protects the lender supplying the funding for the transaction. Of course, purchasing both types of title insurance at the same time can save substantial amounts of money. A single modest premium is all that's needed to help protect your rights, those of your family and those of your heirs.
This insurance is a contract; it agrees to provide legal defense for your title in case of the defects mentioned above and any others covered in the policy's terms and will even reimburse you for financial losses to the limit of the policy. As you can see, title insurance is an important protection that can have enormous ramifications throughout your ownership of the real estate in question.