For those consumers seeking residential lending, one of the many financial aspects they will want to take into account is an owners title insurance policy.  Purchasing a lender’s title insurance policy is required whenever a mortgage is given on real estate.

While individuals enter into agreements with the best intentions of paying on time, unforeseen obligations can affect their abilities to stay current. So, like mortgage insurance, this coverage protects lenders in the  event that the lender must foreclosure and title issues arise prior to the granting of the mortgage. if any claims are brought against properties.

However, many questions regarding the purchase of these obligatory policies remain. The following are the four most common questions asked of title insurance professionals:

1) What exactly is title insurance?
A title insurance policy is a contract of indemnity.  It protects against loss or damage from title issues that arose prior to the buyer’s purchase.  The covered risks include the title being vested in the owner listed on the policy; no liens prior to the policy, marketable title, and access to the property.  All of the covered risks are listed on the policy jacket. Exceptions and exclusions to the policy include governmental regulations, eminent domain, and defects created by the insured, and are also listed in the policy.

Coverage can be purchased by homeowners at the time of a property purchase, and policies aim at protecting consumers against title problems which occurred prior to the transaction. Possible title problems may include omissions or errors in deeds, forgery, undisclosed heirs and mistakes in examining records.

2) When does protection start/stop?
Policies cover losses from claims that may arise prior to the date of issuance. Typically, coverage ends the day a policy is awarded, but extends backwards indefinitely. An Owner’s policy is in force and effect from the date of the policy until the property is sold.  A lender’s policy only goes into force and effect if and when the lender takes title via a foreclosure or a deed in lieu of foreclosure.  The lender’s policy is no longer in force when the mortgage is discharged.

3) Is it necessary to purchase a new policy after refinancing?
The Owner’s policy is good from the time it is purchased until the owner sells the property.  A Lender’s policy must be purchased every time a new mortgage is given.  There is a reduced rate for the purchase of a lender’s title insurance policy in a refinance.

During the time they own a home, many consumers look to take advantage of low rates when refinancing their residential lending. However, while a new owner’s policy will not be required, lending companies usually ask borrowers to purchase a new lender policy when a loan is modified.

4) How long is the policy owner covered?
Protection of policyholders last as long as they, or any heirs, have any obligation to the property. However, if the house is sold, the new owners will be required to purchase a new policy.

These four questions, of course, are just part of the picture. Speaking with seasoned veterans in the mortgage business, like loan officers, can be a big help for borrowers – particularly those entering the market for the first time – in fully understanding title insurance.