What does title insurance cover? You will likely encounter title insurance during the home buying process in New Jersey. It differs from home insurance and can be confusing, especially for those new to buying a home. Home insurance covers your home for damages and provides you with personal liability coverage. Title insurance doesn’t do either of those things! Allow the experts at our title agency in New Jersey to explain what title insurance does do and why that’s important:
What Does Title Insurance Cover: Defective Titles
When it comes to what does title insurance cover, here is a simple rundown of some title terminology.
- The industry refers to a problematic title as defective.
- The act of resolving a title issue might be referred to as perfecting or correcting the title.
- When the title is in good standing, it is called perfect.
- A perfect title also be called clean, free and clear, or sometimes just good.
What is a Perfect Title?
According to The Law Dictionary, It means there is no doubt or dispute linked to the property title. For example, regarding what does title insurance cover, there could be existing liens or title encumbrances you weren’t aware of. There can also be problems caused by filing errors made recently or sometimes even decades ago.
If you purchase a TV, you own it. There is no question about your right to put your TV in your home and watch it. Your neighbor isn’t likely to claim an interest in it or force you to let them watch it. The purchase receipt is adequate proof of ownership and your rights to it. Property ownership, unfortunately, isn’t that simple.
What Does Title Insurance Cover: Comprehensive Coverage
Are you still wondering what does title insurance cover? Well, this is where title insurance comes in. When you purchase a property with title insurance, you protect yourself against any potential problems with the title. This includes issues that occurred before you owned the property.
In regard to what does title insurance cover, here are some of the issues your title coverage helps address:
- Easements – if there is a claim by a third party to a portion of your property, that is called an easement. Easements become problematic when the buyer does not know they exist on their property. Title insurance enables you to afford solutions to these issues.
- Liens–Liens can be attached to the property for financial or legal reasons. Your title insurance covers the costs to take care of any outstanding payment issues assuming they were discovered after you closed on the new property. Issues found while the policy is being underwritten for title insurance are usually addressed by the previous owner before closing.
- Human Error – the most common title defect is human error in past deed preparation or filings. But even though such mistakes are common, they must be resolved to correct the title before the property can be sold to the next owner.
Will the Title Company Just Write You a Check Like Your Auto Insurance Did for Your Car?
Yes, and no, and maybe! It all comes down to what happened and how it needs to be resolved. If an easement is discovered, the title company will work with both parties to resolve the situation. That might include compensation to the owner, a legal change to the property, or a new easement filing, so everyone is on the same page. In more drastic situations, your title insurance will cover court costs and judgments specific to resolving the title defect.
The experienced title agency, Cortes & Hay, we pride ourselves on over 50 years of successfully protecting our clients and their New Jersey property titles. We can take you through the process every step of the way. Contact us today to learn more about how we can help you with your title insurance needs.