What Title Insurance Protects

Purchasing a home is the most expensive financial investment most Americans make in their lifetime. Even for those purchasing a second home or investment property, buying real estate requires significant funds. Federal and state governments have enacted regulations with the intent of protecting consumers transacting real estate, but it’s not foolproof, as Julio and Michelle found out. Lucky for them, they had title insurance protection. 

What’s mine is not yours–or is it?

Julio and Michelle Rodriguez had been happily invested in their home for several years when they planned to add a playground and a shed to their backyard. During the shed’s permitting process, they noticed the property lines recorded at the county didn’t seem to match the ones they remembered from their home purchase. 

The Rodriguezes found a discrepancy in the surveys. This might not have been as big of an issue if their next-door neighbor hadn’t built a fence on what appeared to be their property. The neighbor refused to move the fence, claiming that their survey showed they had possession of that property. 

They now had an adverse possession issue. In South Florida’s housing market, just being two feet over the property line can amount to several thousand dollars in land value. What recourse did the Rodriguez family have? 

Title insurance protection

Title Insurance exists precisely for this reason. The indemnity insurance provides some reassurance the lender and the homeowners will be legally represented and potentially compensated if there are conflicting ownership claims on a property.  Some common claims an Independence Title plan will assist with:

    • Forgery or fraud. Owners have been given title by someone who doesn’t actually own the property, either by forgery, impersonation, or outright fraud. 
    • Liens. Most title searches are thorough and will reveal the most common types of liens against a property. When these liens are discovered before closing, it gives the seller time to rectify the situation or for the buyers to end the contract. However, sometimes liens go unnoticed. This can be the case when a construction vendor levies liens against the property. The lien doesn’t go with the owner but goes with the house. 
    • Unknown heirs. Claimants from the property’s past can appear to claim all or part ownership of your property. This includes divorced spouses that may have been on the deed.
    • Adverse possession. This occurs when a neighbor takes over part of your property and claims it as theirs.
    • Errors in public records. Technology’s systems of checks and balances are relatively new. Recording errors can impact the chain of title and future transactions 

What title insurance doesn’t protect

Title insurance does provide peace of mind that someone will represent you in an ownership claim, but the policies do have exceptions. It will not protect in the case of improper wording or incorrect names, utility issues, unpaid back taxes from your possession, or pending legal action from an issue arising during your possession.

How title insurance protection helps you

For Julio and Michelle, an expensive legal fight was the last thing they needed with another baby on the way. They had purchased an owner’s title insurance policy, and since the issue dealt with conflicting surveys and adverse possession, they were able to make a title insurance claim.

The title insurance company assisted the Rodriguezes by hiring and paying a lawyer to represent their interests in the litigation. The policy paid for new land surveys as part of the pending case. If the Rodriguezes had lost the case, the title insurance company would have compensated them for the lost property value, an appraised $35,000.  Between the property value and legal fees, the title insurance saved the family thousands of dollars.

Not sure if you need title insurance? Learn more about what a policy from Independence Title will cover and how it can protect your most important asset: your home.

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