Buying a Pennsylvania home or commercial lot means you acquire its legal history along with the property itself. To prevent these issues, title insurance protects building or land transactions so they go much more smoothly.
This article explains what title insurance is, why you need it and what it covers. Whether you’re new to the property market or a seasoned buyer, this article offers proactive information to protect your investment.
Title insurance protects lenders and buyers from financial losses stemming from a property’s past title issues. The legal ownership of a commercial or residential property is known as the “title.”
The property title grants the owner the right to use or transfer ownership to another person. A title search before the closing of a property transaction identifies issues in the property’s history, such as fraud or unpaid liens, stemming from a previous owner’s debt.
While a title search aims to identify all prior history, it cannot guarantee the discovery of all potential title defects. Therefore, title insurance protects you from these hidden problems after you take ownership.
It’s easy to confuse title insurance with homeowners insurance. However, while both are valuable, they serve distinct purposes:
Although title insurance is not legally required, it’s highly recommended. If a title search fails to uncover all prior property history, title insurance safeguards against unwelcome surprises. Here are the reasons to obtain title insurance:
Title insurance coverage can depend on the type of policy you take out and the endorsements you add. However, Pennsylvania policies largely follow the same template. Explore the policy types below:
Title insurance offers two policy types:
Overall, title insurance generally protects for the following:
Before purchasing a policy, it’s crucial to review the title insurance exclusions, such as:
When taking out a title insurance policy, you have the option to add endorsements and extend your coverage for specific areas. For example, you may include an endorsement that covers boundary disputes or zoning violations. Here are some common endorsements to consider:
It’s important to note that the endorsements you choose can depend on underwriting and transaction requirements.
The Pennsylvania Insurance Department regulates title insurance prices. Because the state sets base rates, your premium for a specific coverage amount and type will remain the same regardless of your insurance provider. However, total title insurance premiums can differ based on various factors.
Whether you obtain an owner’s or lender’s policy, the cost depends on the property’s value, the mortgage amount and approved Pennsylvania rates. Additional factors include whether the property is residential or commercial, policy endorsements, and eligibility for refinancing.
Although property value carries significant weight in determining premium costs, an owner’s policy may cost anywhere from a few hundred to a few thousand dollars. Title insurance typically requires just one up front payment to cover your property.
Despite state rate regulations, you can save on title insurance costs. One way is to inquire about refinance rates. You may receive a discounted rate if you’re refinancing.
Furthermore, purchasing both a lender’s and an owner’s policy simultaneously can save costs compared to buying them separately. Strategic selection of endorsements can also help reduce costs by only choosing relevant add-ons.
Generally, the buyer pays the one-time title insurance premium. However, payment responsibility can vary between buyer and seller. Typically, the buyer pays for a lender’s policy to cover the lender’s financial investment. With an owner’s policy, the seller can agree to cover the premium, depending on the transaction agreement.
Acquiring title insurance comes with a host of jargon that may appear off-putting. To help you, as buyers or sellers, navigate title insurance with confidence, refer to the following glossary:
At Johnson Duffie, our dedicated team ensures you receive a reliable title insurance policy through our affiliated company’s vast experience in the sector.
We’re proud to represent sellers and buyers and aim to provide a seamless experience in helping you buy a property. Ready to discuss your title insurance needs? Contact our attorneys today to schedule a consultation.