Articles   What a home buyer should know about title insurance by Colette Symon Hanratty, Esq. 2003 was another year of tremendous turnover in the Darien real estate market. Prices continued to rise and more and more people were taking advantage of low interest rates which allowed them to purchase higher priced homes or to jump in to buy their first one. As soon as the weather warms up potential home buyers usually go out “house-hunting”. Part of the process of purchasing a home is getting in touch with an attorney who will guide them through every step of the transaction. Buyers frequently ask their attorney why they should buy title insurance when they purchase or refinance a property. This article hopes to give answers to the questions most often asked. Q. What is title insurance? A. Title insurance protects the homeowner or their lender from losses that occur from various matters affecting legal ownership to property (title). An Owner’s Policy protects the owner, and a Loan Policy protects the holder of your mortgage (i.e. your bank). Q. Why do I need to buy an Owner’s policy as well as a Loan Policy? A. A Loan Policy only protects the lender’s interest in the mortgage. As the owner of the property you will usually have more at stake than the lender and you would be liable for any title problems that might arise. A one time premium for an Owner’s Policy insures you throughout your ownership and after you sell. Your lender will require you to pay for a Loan Policy at the time of closing and the additional cost for an Owner’s Policy is usually small, so we always recommend that our clients purchase an Owner’s Policy. Q. Must I purchase a new Loan Policy each time I refinance? A. Your lender will require a new Loan Policy in the amount of the new loan each time you refinance, even if you are refinancing with the same lender. Q. I paid my attorney for a title search and he says everything is okay – why do I need title insurance? A. A title policy insures against many defects which could not be discovered in a title search, as well as insuring against errors made in the title search itself. Following are some of the hidden title defects that would not be disclosed by even the most meticulous title search, but are covered by an Owner’s title policy: Forgery or fraud in the execution of documents; survey errors; undisclosed or missing heirs; wills in the chain of title which have not been properly probated; misinterpretation of wills or trusts; mental incompetence of a grantor of a deed; transfer of title by a minor; incorrect legal descriptions; unsatisfied claims not shown of record or non-delivery of deeds; deeds executed under expired or false powers of attorney; incorrect indexing of the land records; clerical errors in recording legal documents; delivery of deeds after the death of the grantor. Q. What’s covered under a standard Owner’s Policy? A. A standard Owner’s Policy insures that you are the rightful owner of the property and have a legal right of access to it as well as against losses from any liens or encumbrances on the property except those listed in the policy. It insures against your title being rejected by a subsequent buyer because it is unmarketable due to a title defect or lien. In addition, the title policy pays for the attorney’s fees and costs associated with defending the title. You are covered under the policy as long as you own the property and also after you sell the property if you give a warranty deed to a buyer. It also includes inflation coverage which means that the amount of the policy automatically increases on a yearly basis up to 150% of the original policy amount at no extra charge. Q. Expanded/Enhanced coverage Owner’s policies: A. Talk to your attorney about the newer “enhanced” Owner’s policies which are now offered by all title companies for an additional premium. These policies include the same coverage as standard policies but include additional coverage, even some matters occurring after the policy issue date. As an example, these policies can insure against loss of use of your property, forced removal of structures, required corrective measures and other losses due to violations of zoning ordinances, private restrictions or from the failure to obtain a building permit. In addition, survey coverage can be provided without obtaining a new survey of the property. Some of these coverages are subject to deductibles and caps, so be sure you have them explained to you by your attorney at time of closing. Q. What does a Title insurance policy cost? A. The premium amount is dependent on the purchase price of the property. Your attorney will be able to give you an exact quote.   COLETTE SYMON HANRATTY is a Darien resident and partner of the law firm of Rucci, Burnham, Carta, Carello & Reilly, LLP with offices in Darien and New Canaan. Attorney Symon Hanratty practices in the areas of residential real estate, commercial real estate as well as zoning and general business matters.