Page 27 - Home Buyers and Sellers Guide - Hawaii

Q. What are my chances of ever using my title policy?
A. In essence, by acquiring your policy, you derive the important knowledge that recorded matters have been
searched and examined so that title insurance covering your property can be issued.

When a title company provides a legal defense against claims covered by your title insurance policy, the savings
to you for that legal defense alone will greatly exceed the one-time premium.

Because title insurance companies are risk eliminators, the probability of exercising your right to make a claim
is very low. However, claims against your property may not be valid, making the continuous protection of the
policy all the more important.
Q. What if I am buying property from someone I know?
A. You may not know the owner as well as you think you do. People undergo changes in their personal
lives that may affect title to their property. People get divorced, change their wills and engage in transactions
that limit the use of the property and have liens and judgments placed against them personally for various
reasons.

There may also be matters affecting the property that are not obvious or known, even by the existing owner,
which a title search and examination seeks to uncover as part of the process leading up to the issuance of the
title policy.

Just as you wouldn’t make an investment based on a phone call, you shouldn’t buy real property without
assurances as to your title. Title insurance provides these assurances.

The process of risk identification and elimination performed by the title companies, prior to the issuance of a
title policy, benefits all parties in the property transaction.

Title insurance minimizes the chances that adverse claims might be raised, and by doing so reduces the number
of claims that need to be defended or satisfied. This process keeps costs and expenses down for the title
company and maintains the traditional low cost of title insurance.

Reprinted with permission from the California Land Title Association (CLTA).

FREQUENTLY ASKED QUESTIONS ABOUT TITLE INSURANCE

Q. What does title insurance insure?
A. Title insurance offers protection against claims resulting from various defects (as set out in the policy) which
may exist in the title to a specific parcel of real property effective on the issue date of the policy. For example,
a person might claim to have a deed or lease giving them ownership or the right to possess your property.
Another person could claim to hold an easement giving them a right of access across your land. Yet another
person may claim that they have a lien on your property securing the repayment of a debt. That property may be
an empty lot or it may hold a 50-story office tower. Title companies work with all types of real property.

Q. How much can I expect to pay for title insurance?
A. This point is often misunderstood. Although the title company or escrow office usually serves as a meeting
ground for closing the sale, only a small percentage of total closing fees are actually for title insurance
protection. Your title insurance premium may actually amount to less than 1% of the purchase price of your
home and less than 10% of your total closing costs. The title policy is good for as long as you and your heirs own
the property with the payment of only one premium.

Q. Why are separate owner’s and lender’s title insurance policies issued?
A. Both you and your lender will want the security offered by title insurance. As the owner, you will want
assurances that the home is yours and that you are protected against certain title defects. Your lender will likely
want title insurance in order to protect its loan security interest, and may even be required to have a lender’s
policy in place in order to sell the loan to secondary market investors.

23 24