Title insurance is an essential part of real estate investments. Forgery of the deed in the past, incorrect legal descriptions, misspelled names and other irregularities in the chain of title places a cloud over the title’s integrity. To avoid this, a Title Search has to be performed by an Attorney or a Title Search company. Based on a positive result, a title insurance commitment will be issued, which in turn can be used to obtain Title insurance.
This insurance is somewhat unique in the fact that it covers past events. The Title insurance in this case can protect you by defending any claims by previous owners or their children, covering any damages and even reimbursing the value of the property in the event that you lose the lawsuit. However any positive outcome for you depends on how candid you were with the company on all the problems you were aware of regarding the property.
To save on that cost of the policy, find out if the company will offer a re-issue rate. If the property had a title insurance issued to it in the last few years, then the risk is of anything gone wrong in that period is low. Therefore, you are can get a policy at a discounted price, which is sometimes as much as 40 percent. However, this policy will only cover that smaller period.
At the time of purchase, if your intent is to re-sell the property, you may opt for a Hold Open policy. Usually for a small fee of about 10 percent of the insurance policy, the company will keep the title commitment open for a year or more depending on your requirement. The insurance policy is issued when you sell to your buyer and that person ends up paying for it and not you. This way you can save up to 90 percent on the title insurance fee at the time of purchase.