What is land title insurance?

Here are some facts and fallacies about title insurance that will surprise many homebuyers.

Myth: Title-related charges make up a substantial portion of closing costs and are a major obstacle for buyers of moderately priced homes.

Reality: Title insurance and other title-related charges make up a modest percentage of total closing costs when compared to lender and realty agent fees.

Myth: Lender's title insurance protects the homebuyer.

Reality: The interests of the lender and owner are often substantially different. The lender's policy is written in the amount of the loan. If there were a total failure of title, the lender would be covered for the full amount of its investment-while the buyer would have no coverage at all.

Owner's title insurance will protect the purchaser if a claim is made against the title. Owner's title insurance will also pay any legal fees in defending the claim.

Myth: High on the list of title insurance myths is one that says title insurance losses are low.

Reality: The reality is quite different. In 2002 and 2003, title insurers paid $582 million and $661 million in claims, respectively.

To learn more, visit the American Land Title Association Web site at www.alta.org.

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