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What is Title Insurance?

When you purchase a home on Martha's Vineyard, instead of purchasing the actual building or land, you are really purchasing the title to the property - the right to occupy and use the space. That title may be limited by rights and claims asserted by others, which may limit your use and enjoyment of the property and even bring financial loss. Title insurance protects against these types of title problems for Martha's Vineyard real estate and brings confidence and certainty to the parties at a real estate closing that the title of the subject real property is as represented and expected. The title insurer offers financial protection and will indemnify and defend against an attack on covered title hazards as insured, and will either perfect the title or pay valid claims.

Title search and examination requires the search of numerous public documents including tax, court judgment, deed, encumbrance, federal and state records and the evaluation of real property characteristics such as flood zone and location. Abstractors, lawyers, title insurance agents and title insurance companies, sometimes called "underwriters", all work together to accomplish this process.

You will also purchase several other types of insurance coverage to protect your home and personal property. Homeowner's insurance protects against loss from fire, theft, or wind damage. Flood insurance protects against rising water. These types of insurance protect your Martha's Vineyard home, focusing on possible future events. You pay an annual premium charge for this insurance coverage. On the other hand, title insurance protects against hidden title hazards and loss from any defects that already exist in the title and may threaten your financial investment.

In other words, title insurance is the acceptance of risk for past transactional events rather than future occurrence of events. Title insurance has a single one-time premium paid at closing, no termination date and no time limit on the filing of claims, whereas homeowner's hazard insurance has an annual premium charge.

There are two basic kinds of title insurance:

If you are financing your Martha's Vineyard real estate purchase you will be required to have a Lender’s Title Insurance policy. That policy only protects the amount of the Lender’s investment, not your total investment.

Your Martha's Vineyard Attorney will strongly advise you to purchase an Owner’s Title Insurance policy to cover your total investment.

Here is a very important disclosure you need to be aware of:
For the purchase of a title insurance policy, your Attorney also represents the title insurance company as their Agent. As such he will receive a fee (commission) from the Title Insurance Company when you purchase a policy. Normally, the fee structure is 30% of the total cost of the policy goes to the Title Insurance Company and 70% goes to the Agent – your Attorney. If you purchase Lender's Title Insurance only the cost will be $2.50 per thousand. Lender's Title Insurance only covers the Lender's investment in the property. If you purchase Lender’s and Owner’s Title Insurance policies simultaneously the cost will be $3.50 per thousand based upon the total purchase price of the property. At that time the Lender’s policy will only be an additional $175.00.

  • Lender or mortgagee title insurance protects the lender/investor as security for making mortgage money available to a buyer. It does not protect the buyer.

  • Owner's title insurance protects the buyer, lasts as long as you, the policyholder - or your heirs - has an interest in the insured property. This may even be after you have sold the property.

  • Documents that don't clearly transfer title are quite often found in the "chain," or history that is assembled from the records in a search. Here are some examples of documents that can cause concern:

  • Deeds, Wills and Trusts that contain improper wording or incorrect names;

  • Outstanding mortgages and judgments, or a lien against the property because the seller has not paid his taxes;

  • Easements that allow construction of a road or utility line or view easements Note: there are many cart paths and ancient ways on Martha's Vineyard;

  • Pending legal action against the property that could affect a purchaser; or

  • Incorrect notary acknowledgements.

  • Despite all the expertise and dedication that go into a title search and examination it is possible that hidden title problems can emerge after closing resulting in unpleasant and costly surprises despite Some of these hidden problems include:

  • A forged signature on the deed, which would mean no transfer of ownership to you;

  • Instruments executed under an expired or a fabricated power of attorney;

  • Mistakes in the public records; or

  • An unknown heir of a previous owner who is claiming ownership of the property. A title insurance policy is not an agreement to guarantee the state of title to real property, but is, rather, an agreement to indemnify the insured for loss or damage sustained by the insured due to a defect in title. The crucial concept to remember is that the policy insures against actual loss sustained by an insured due to a defect in title.

Owner’s Title Insurance -- One More Time

I paid for a title search --- why do I need to buy title insurance also?

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.

Is Owner’s coverage expensive?

No. A one time premium covers you throughout your ownership and after. When you are already paying for a loan policy, the additional cost of an Owner’s policy is usually small.

What’s Covered Under A Standard Owner’s Policy?

The standard Owner’s policy provides the basic coverage for a homeowner:

  • It insures that you are the owner of the property.

  • It insures 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.

  • It insures you have a legal right of access to the property.

The title policy not only protects you against losses due to title claims covered by the policy, it also pays for the attorney’s fees and costs in defending the title.

You are covered under the policy for as long as you own the property, and also for liability after you sell the property if you provide title covenants in your deed to the new buyer.

20 Important Reasons Why You Should Have Owner’s Title Insurance.

These are just some of the hidden title risks that would not be disclosed by even the most meticulous title search, but are covered by an Owner’s policy of title insurance:

  1. Forgery
  2. Fraud in the execution of documents
  3. Undue influence on a grantor of a deed
  4. False impersonation by someone purporting to be the owner of the property
  5. Incorrect representation of marital status
  6. Undisclosed or missing heirs
  7. Wills not properly probated.
  8. Misinterpretation of wills and trusts
  9. Mental incompetence of a grantor of a deed
  10. Transfer of title by a minor
  11. Heirs born after the execution of a will
  12. Incorrect legal descriptions
  13. Non-delivery of deeds
  14. Unsatisfied claims not shown on the record
  15. Deeds executed under expired or false powers of attorney
  16. Confusion due to similar or identical names
  17. Dower or courtesy rights of spouses of former owners
  18. Incorrect indexing of the land records
  19. Clerical errors in recording legal documents
  20. Delivery of deeds after the death of the grantor

Courtesy of Fidelity National Title Insurance Company.

w w w . S P L I T R O C K R E . c o m

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