How to Obtain the Policy
Before the policy is issued, the insurance company will conduct a title search to find any potential issues that might arise in the future. Through the examination of public records, the company will find and review any documents that might result in problems, such as liens, tax assessments, other tax documents, and special documents, such as divorce or bankruptcy filings. The results of this report are then put together in the title commitment, which represents the extent of the insurance and any exceptions. Also called a title binder, it is a proposal that becomes binding when you pay for the insurance.
Things You Should Keep in Mind
Of course, you should note the type of policy you are paying for. Some lenders will demand a Lender's Policy of Title Insurance before they issue a loan. However, you should note that the title commitment for these policies will only protect the lender and is tied to the mortgage, not the property. Instead, consider an Owner's Policy, which will remain in force as long as you stay in the property and can protect you against title claims unknown at the time of the purchase, such as forged documents or missing heirs who turn up and demand a portion of the property's worth. While costs might seem steep and the relatively low risk of such a situation developing may deter you, consider the potential costs if you happen to be one of the unlucky people who do witness the return of a lost, angry heir.
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This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.