The purpose of NY title insurance is to protect the lender in the event that a defect in the title is discovered after closing. If there is a defect, the lender may be able to recover its losses from the title insurance company. At worst, the combination of lender’s and title insurance company’s loss would be limited by policy limits. You can learn more about this process by contacting an abstracting company like MacGregor Abstract.
Titling: The first step in obtaining title insurance protection is to apply for a title search. This is an examination of the property records on file with the county clerk to determine if there are any liens, judgments or other claims outstanding against the property. If there are such claims, you may have to pay them off before you can get a clear title and obtain insurance protection.
Insurance Protection: The final step in obtaining title insurance protection is purchasing a policy from an authorized insurer that specifically names each owner and insured party and contains certain provisions related to how and when coverage terminates. Once this policy is in place, if an undisclosed claim or lien is discovered after closing, you can make a claim against your insurer for payment of your loss.
The primary purpose of a title search is to identify all outstanding interests in real property that must either be paid off or subordinated before you can obtain clear legal title to the property. Title insurance is an indemnification policy that protects the holder, usually a borrower, against losses due to defects in the title of the property being insured.
Titles are not always perfect, which can result in problems for the new owner. Imagine buying a house and later finding out that you cannot use it as collateral for a loan because there is no way to verify that you own it. You might also have trouble selling it since potential buyers will be wary about your ability to transfer good title.
As for why you need it, if you are buying property that already has a mortgage on it and the loan does not get assumed or refinanced into your name, then you need title insurance to protect yourself from any defects. If there are any liens or claims against the property, then those must be cleared from the title before you can assume ownership and enjoy all of its benefits.
Title insurance is not cheap, but it’s an important part of protecting your investment. Whether you’re buying a home, condo or co-op, you need to make sure that you have sound title to the property and that nothing is hidden or in dispute. Title insurance protects the homeowner against losses arising from defects in the title to their property that were unknown at the time of purchase.
With most types of insurance there’s a certain amount of risk involved. Your car insurance may help pay for damages if you get into an accident, but you still have to prove that you weren’t at fault. In contrast, with title insurance, the policy itself guarantees that there are no title defects on your property.
There are two types of title insurance policies: owner’s policies and lender’s policies. An owner’s policy will cover any financial loss you suffer due to defects in your title; for example, if someone sues you because they think they own a piece of your property and wins, your title insurer will reimburse you for your legal fees and any other losses associated with this defect. A lender’s policy only covers financial losses related specifically to paying off liens on your property — things like mortgages or unpaid taxes.
