Page 32 - Homeowners Manual - Utah

8 COMMON MISCONCEPTIONS ABOUT TITLE

Buying a new home is one of life’s most gratifying experiences� Making sure your right to own the
property is protected can be just as rewarding� During the process of purchasing your dream home,
you’ll hear two words you’ve probably never given much thought – title insurance�

As with the rest of the home buying process, title insurance can be difficult to comprehend� To
complicate matters, the topic is often surrounded by misconceptions that keep home buyers from
recognizing its importance� To help you get a better understanding of what title insurance is and how it
protects your property rights, let’s analyze eight common misconceptions:

1� Title Insurance offers only minimal protection�

When you purchase a home, you receive “title” to the property� Title is your legal right to own
it� Early in the home buying process, a title search is conducted to review the history of the property
and uncover any issues that could limit your right to ownership� Even after the most meticulous search
of public records, there can be hidden title defects, such as tax liens, forged signatures, claims by ex-
spouses and recording errors� These title defects can remain undiscovered for months or even years
after you purchase the home�

2� There is only one type of title insurance�

There are two types of title insurance policies: an owner’s policy and a loan policy� An owner’s policy
protects you, the property owner, against loss or damage in the event there is a covered title defect in
your right of ownership to the property� If you’re obtaining a mortgage loan to purchase your home, a
mortgage lender will likely require that you purchase a loan policy, also known as a lender’s policy� This
type of policy protects the lender’s interest in the property until the mortgage loan is paid in full� The
loan policy provides no coverage to the homeowner�

You can opt for more enhanced coverage within your owner’s policy� Standard coverage protects you
against financial loss and related legal expenses for common title defects that occurred prior to the
date of the title insurance policy� Enhanced coverage includes all the standard coverages, plus even
more for maximum protection, some of which protect against matters that may transpire after the date
of the policy�

3� Title insurance requires a monthly or annual premium�

Unlike most insurance policies, there is no monthly or annual premium� Title insurance is a one-time
cost you pay at closing when you purchase or refinance real property�

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