So you have begrudgingly paid hundreds of dollars for a title policy… Now what? In the investor world, one of the most frequently asked questions I get is “Do I need this?”. I always say yes and here is why:
I could tell you lots of horror stories about lenders and buyers who did not see title insurance as a necessity and ended up going out of business or worse, losing everything. I am going to stick to the highest risk, TOTAL TITLE FAILURE. This happens when a property is bought and for one reason or another it is found that the properties title chain had issues and the property does not belong to the insured owner. I will give you an example or as we call it in the industry a horror story.
An investor bought a piece of property, fixed it up and put a renter in it. A few months later they receive a phone call from the son of a previous owner stating that they own the property and want them out before they call the police. The investor is also contacted by the FBI indicating that the person they bought the property from is being investigated for fraud. Apparently the fraudster finds vacant properties, forges deeds and then sells them to unsuspecting buyers. That being said, almost all title policies have fraud coverage so this is something you then would contact your title company about because you will have a total loss of title. The first thing you should do if you have any issues with your chain of title is contact your Escrow Officer and ask them for a claim form. Keep in mind that title and escrow are two different animals and your Escrow Officer cannot file a claim for you nor can they help push it along. It goes straight into the claims department. The claim process is not a quick and easy process, much like filing a claim for car insurance. The company will review the policy to see if the item you are having an issue with is covered by your policy and then investigate to be sure there is no foul play or insurance fraud involved. They will need to inspect the title chain and all the information regarding the title issue. You should submit your claim with as much information as possible to help expedite the process. Depending on the expense and the depth of the issue, this can take a few months or longer. Although this process can be frustrating, the end result is that you get paid the benefits of your policy so you do not have to take the full loss. In the above mentioned scenario the loss was in excess of a million dollars and the claim was paid under the fraud provision of the policy. Now that is why you pay for title insurance!
As the largest title company in the nation and a Fortune 500 company, Chicago Title is committed to protecting you and providing resources to do just that!
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