One of the most important things to cover when purchasing property is obtaining title insurance in New Jersey.
In this article we will learn in detail what New Jersey title insurance is. If you need legal advice for this process, the experienced NJ real estate attorney at Curbelo Law can help you.
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Table of Contents
What Is Title Insurance In New Jersey In 2024
Title insurance provides coverage for future claims or losses due to past real estate title defects. That is, title insurance provides coverage for an event that occurred prior to the acquisition of the property.
Characteristics Of Title Insurance
- This policy is paid as a single fee at closing.
- The coverage provided to the underwriter of the insurance lasts until the property has been sold or refinanced.
- This insurance protects both the borrower and the lender and owner. Provided that insurance has been contracted for both the lender and the owner.
- This insurance differs from other insurance because instead of protecting against a possible future event, it insures individuals against events that have occurred in the past.
- The indemnity policy insures the owner against losses caused by defects in the title. These can be by:
- Unknown liens.
- Encumbrances.
- Non-marketable titles.
- Invalidity.
- Unenforceability of mortgage liens.
Need help understanding all of this? Don’t worry, you can contact us today. At our firm you will find quality legal advice as well as support for first time homebuyer programs in New Jersey.
Why Does Title Insurance Exist?
In the 19th century, property owners had no legal recourse against fraudulent or invalid title deeds. It wasn’t until 1874 that the Pennsylvania Legislature stepped in and passed a law allowing title insurance.
In 1876, the first title insurance company was incorporated in the state of Philadelphia. Subsequently, other states followed this example.
Is Title Insurance Required In NJ?
Title insurance is not required by law to purchase real estate in New Jersey. However, it is recommended to have it. Additionally, many lenders require the buyer to purchase title insurance as part of the closing process.
- When an attorney orders title insurance for a property closing, the title agency conducts a search of the property’s public records.
- This search determines if there are any defects in the title that must be resolved before closing.
- The seller must resolve such defects in order to transfer clear title to the buyer. This as required in the sales contract.
- When the buyer requires a mortgage, the lender can detail that the buyer must provide title insurance as a condition of their commitment to the loan.
Title problems arising after closing will not be included in the scope of coverage of this insurance. This is because such issues were not known at the time of closing.
Do you already know what a property title search is in New Jersey? In our blog you can find an article focused on explaining such a process in detail.
Who Pays For Title Insurance In NJ?
Title insurance is paid for by a home buyer in New Jersey. The fee for this policy is part of the closing costs of a home in New Jersey.
In New Jersey, the cost of the policy is only a nominal fee that is added to the owner’s premium.
Buying a home may seem overwhelming, given how much you have to pay. However, for these reasons there are different types of mortgage loans in the US. On our blog, you can also read our tips for applying for a mortgage.
Is Title Insurance In NJ A Fixed Cost?
Although title insurance is not required by law in New Jersey, the cost of title insurance is set by state law. Such insurance costs the same no matter what type of company is used.
However, a portion of the insurance cost is reduced if the attorney provides information about a back title to the title company.
How Much Does Title Insurance Cost?
Compared to the cost of other insurance, the cost of title insurance is relatively cheaper. While title claims are rare, they tend to be monetarily high due to real estate value.
Also, the title insurance fee is only paid once and protects the owner for as long as they own the property. In most states, the fee for title insurance is set by the Department of Banking & Insurance.
Insurance is very important and there are many types of these. For example, one of them is flood insurance which is highly recommended in New Jersey. We invite you to read more about this policy in our respective article.
Can Title Insurance Costs Be Negotiated?
In most cases, title insurance rates are non-negotiable. However, in some cases buyers can ask their agents to negotiate and let sellers be the ones to pay the amount.
Factors Affecting Title Insurance Costs
Title insurance costs generally fall into two categories:
- Premium.
- Service fees.
In each of the categories, the costs can be further broken down based on the amount and type of work required to fulfill the policy.
For example, some of the factors that can affect premiums are:
- The amount of work to conduct a title search and to maintain accurate and up-to-date information on the property and adjacent properties.
- Expected cost to compensate the insured party for any type of defect in the title.
- The preliminary work required to remedy any adverse interest or defect found.
On average, the title insurance policy carries a one-time fee of $1,000 and can cover all up-front work, ongoing legal, and loss coverage. However, fees vary widely, ranging from a few hundred dollars to more than $2,000.
Premium Regulations
There are certain regulations on title insurance premiums. However, these vary substantially between states. In New Jersey there is a “prior approval” regulation.
Prior approval requires each title insurer or local business organization representing multiple insurers to annually provide new rates to local regulatory authorities.
It should be noted that such fees cannot be charged until they are approved by the authorities.
What Is Not Covered By Title Insurance In New Jersey?
Title insurance may not cover the following:
- Damage caused by natural calamities such as thunderstorms.
- Financial losses due to inadequate home inspection in New Jersey.
- Infestation.
- Fire damage.
A fire can happen at any time and Garden State is no exception. In our article “NJ smoke detector requirements and certificate” you will find extensive information about it.
New Jersey Title Insurance FAQs
In the event of a claim against an insured title, the policy protects the owner by defending the title and bearing the cost of settling the case (if necessary). Such a policy allows you to continue to maintain possession of your property.
It is very important to receive a clear title to the property. To receive it, you must first have information about any existing rights or claims that may threaten title or possession of the property in the future. Title insurance provides this dual protection.
The property title could be threatened by hidden risks. Such risks are those rights, claims or matters that are not shown in the public records. Forgery or fraudulent identity are the most common in this area.
Title insurance can be purchased from any reputable title company in New Jersey. However, if you do not have enough experience or simply do not have knowledge about this, you can ask our real estate lawyer to help you in the process.
Curbelo Law Can Help You With Title Insurance In New Jersey
It is of great importance for a home buyer to protect themselves against the consequences of a property title that contains defects. Therefore, we invite you to call the Curbelo Law firm today to let us know about your case.
Our firm has more than 10 years of experience dealing with all these real estate issues. Therefore, you will be in good hands when it comes to knowing your possibilities.
FULL LEGAL REPRESENTATION AND COUNSELING
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