Two Types of Title Insurance
Title insurance exists to protect the new owner of property, the buyer, or to protect the lender, usually a bank. Most purchasers of property in Massachusetts will be required to obtain a title insurance policy as a prerequisite to obtaining a mortgage. Even if not required to purchase title insurance by a lender, as it is a one-time cost and serves to protect the new homeowner from defects of title that may arise, it is a wise purchase to make even if not otherwise required.
Who Helps Me Find Title Insurance and How Much is Title Insurance?
It is typically the buyer’s attorney or real estate agent that seeks out title insurance for a home buyer in Massachusetts. Plans can range from $400 to $3000 dollars on average and vary based on what information is discovered in the title search. More expensive title insurance policies occur because of some aspect of title that creates greater potential risk for the insurer.
The Title Insurance Policy
In Massachusetts, Title Insurance is not reviewed or approved by the Massachusetts Division of Insurance. While this fact does not indicate potential wrongdoing among title insurers, it does mean that title insurance providers are not necessarily following some standard or approved format. This lack of standardization means that many title insurance policies may differ widely. It is prudent to read the title insurance policy carefully to note exactly what a title insurance policy covers and what it does not. The exclusions portion of the title insurance policy will be the source you should use to determine precisely what is, and what is not covered by the policy.
Homeowner’s Insurance Policy
Be sure to understand the differences between a homeowner’s insurance policy and title insurance. Homeowner’s insurance exists to protect the homeowner from damage to the physical property, say an accidental fire or other disaster. Title insurance exists to protect the homeowner from a defect on title (see my article, “Is Title Insurance Required When I Purchase a Home in Massachusetts?”) for an accounting of common title defects that a title insurance policy may protect you from.
Using Your Title Insurance
While I hope that you are never in a position to need to use a title insurance policy to protect against a claim on title, here is what to do if you find yourself in such a position. First, check with your title insurer to determine the insurer’s policy on receiving notice of a possible claim, each insurer will likely be a bit different. So, if you become aware of a claim against your title you will want to follow the title insurer’s method and timing of notice policies. Second, because most title insurers will inform you of what is covered and how to proceed on the company’s closing protection letter and the title policy itself, keep copies of these documents on hand so that you may refer to them for the correct procedure to follow.
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