Most insurance is a contract where the insurer indemnifies or guarantees another party against the possibility of a specific type of loss (such as an accident or death) that may occur at a future date. Title insurance generally insures against
Most insurance is a contract where the insurer indemnifies or guarantees another party against the possibility of a specific type of loss (such as an accident or death) that may occur at a future date. Title insurance generally insures against losses caused by title problems that have their source in past events.
Almost every parcel of land has had many owners. What they did or did not do can affect title to the land. Have assessments and taxes been paid? Were there lawsuits or judgments against former owners? Does a contractor or a spouse or utility company have any rights?
Title losses arise from three principal sources: (1) Errors in searching the records, (2) errors in interpreting the legal effect of those records, (3) facts outside the records, known as “off-record risks.” The title insurance company protects itself and the policyholder in the case of the first two sources of risks set out above by employing trained, competent searchers and examiners who are qualified to search and interpret records.
There are, however, many sources of title defects outside the record, any one of which may also involve loss of title. The owner must assume these hidden defects if the owner does not possess a title insurance policy. Some of these off-record risks are: fraud, forgery, false impersonation, alteration, copyists’ errors, acts of minors, insanity, rights of unrevealed spouses and children, and void judgments and decrees.
Two types of title insurance policies for real property are common: a lender’s policy and an owner’s policy. Just as lenders require fire insurance and other types of insurance coverage to protect their investment, nearly all institutional lenders also require title insurance to protect their interest in the collateral of loans secured by real estate.
The lender only requires title insurance to cover the amount of your loan; the homebuyer should insure the full purchase price of the property.
Insurance premums are usually paid in one lump sum at the time the policy is issued. In addition, title insurance can be purchased to insure any interest in real property, including an easement, lease or life estate.
In Hawai‘i, it is customary for the seller to provide proof of title. The seller usually pays for the cost of the certificate of title required on the purchase contract. The seller is also responsible for a portion of the title costs at closing.
Title insurance coverage will continue as long as the insured retains an interest in the land insured, typically no additional premium is paid after the policy is issued.
Title companies in Hawai‘i also handle property closings and hold earnest money in a trust account, also known as an escrow account, until the purchase is complete.
Title insurance companies may offer discounts for title insurance and escrow, such as for first-time buyers, senior citizens, certain professions, a “short-term rate” for a property that has been resold within the last five years, and those purchasing investment properties.
The decision to purchase a home (or other real property) is probably the largest and most important financial decision you will make.
Title Insurance is a very important step in protecting that investment and providing piece of mind. For more information, contact your Realtor or the following escrow companies on Kaua‘i:
• First American Title, 808-341-0263, www.firstam.com
• First Hawai‘i Title, 808-826-8612, www.firsthawaii.com
• Old Republic Title & Escrow, 808-821-6808, www.ortc.com
• Security Title, 808-245-6975, www.stchawaii.com
•Title Guaranty & Escrow Services, 808-245-3381, www.tghawaii.com
• The Kaua‘i Board of Realtors is a real estate resource for its members and the community it serves. It is a nonprofit organization comprised of 450 Realtors and associates from the bank, mortgage and title/escrow industry. The board answers reader questions twice a month in the Business section. For more information or to submit questions about the real estate industry, mail them to: Kaua‘i Board of Realtors, Attention: Questions, 4359 Kukui Grove Street Suite #103, Lihu‘e, HI 96766; 245-4049 or visit us at www.kauaiboard.com
