Who Pays For Title Insurance In Alabama

Feb 1, 2024

For most of us, purchasing a home is a lifetime investment. The process involves various procedures and costs, one of which is called title insurance. Understanding the ins and outs of title insurance is crucial to protecting your investment as the owner. It’s also a safety net for lenders.

Who Pays For Title Insurance In Alabama?

Today, we’re breaking down everything you need to know about title insurance. From “What is title insurance?” to “Who pays for title insurance in Alabama?”, our guide explains it all!

What Does Title Insurance Mean?

Title insurance is a type of insurance that protects the owners and mortgage lenders from monetary loss due to issues with the property’s ownership and title.

Examples of such issues include third-party claims such as tax claims from the IRS for previous owners who failed to complete payments, or previous contractors who are yet to receive full compensation.

Other forms of defects in ownership transfer may include disputes over property borders, faulty property deeds, easements, forged/unauthentic documents, encroachments, and document recording errors.

Title insurance is a valuable investment in your financial safety. It takes effect starting from the date specified in the policy contract and guarantees reimbursement for the insured from the insurer.

This occurs in case of financial loss due to any changes in the title status (other than those stated as exceptions in the contract). The value depends on the dollar amount lost and is capped at the limit specified in the policy.

  • Note that there may be no need for reimbursement as title insurance can defend against lawsuits filed to attack the title.

Does Title Insurance Have Different Policy Types?

Yes, title insurance is available in two policy types. These are called owner’s title insurance and lender’s title insurance.

The policy for an owner’s title insurance is directed at homebuyers to protect them from defects related to ownership and title transfer (such as the ones we talked about in the previous section). An owner’s title insurance is paid only once during the home purchase process, with a title company on the receiving end. Although it’s optional, we strongly recommend investing in an owner’s title insurance to safeguard your financial interests. As for the lender’s title insurance, it’s mandatory to buy if you’re having a mortgage lender finance your property purchase. This policy comes into play in case someone claims a right to your property.

How Much Are You Expected To Pay for Title Insurance in Alabama?

The average cost of title insurance in Alabama ranges between 0.5% to 1% of the purchase price of the property. To calculate, you’ll multiply the house’s purchase price by a number between 0.005 and 0.01, depending on the title company and the policy you choose. The cost of title insurance includes the fees for various processes such as title search and settlement, land survey, deep preparation, and escrow. It also covers the notary fees, the real estate attorney expenses, as well as the cost of abstract and recording of title ownership history.

Who Covers Title Insurance Costs in Alabama?

If you’re buying a home in Alabama and decided to invest in a title policy, you may be confused as to who should be paying for it. Some might tell you it’s the buyer while others might tell you it’s the seller, and well, they’re both correct. That’s because the matter of paying the owner’s title insurance is negotiable. As the homebuyer, you can negotiate covering the title policy by the seller as part of your purchase contract. Generally, the seller is the party that pays for the owner’s title insurance in Alabama. That said, the buyer is the one responsible for paying the costs of the lender’s title insurance in Alabama.

Who Chooses the Title Company?

Since it’s typically the seller who pays for the owner’s title insurance, does this mean they get to choose the title company to buy from? The answer is no. The homebuyer is free to choose which title company to deal with for title insurance purposes. The same goes for the lender. Keep in mind the seller or your real estate agent may suggest title companies that they have worked with or are currently working with. Still, you’re under no obligation to pick one of their suggestions if you’re worried about them charging you more to get kickbacks.

Boundary Title

Title insurance is a customary policy for the seller to provide to the buyer upon transferring ownership of a house. In Alabama, it’s customary for the seller to pay for the owner’s title insurance. The buyer, however, has to purchase the lender’s title insurance. If you’re looking to buy title insurance, contact us at Boundary Title, and we’ll guide you every step of the way.

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