Legal Question in Insurance Law in Louisiana

Re: Difference between Hazard insurance and Title insurance

Purchasing a home is likely to be one of the most significant investments you will ever make, both financially and emotionally. You can not afford to take a chance that your home will be taken from you due to a flaw in the title. Title insurance will provide you with peace of mind.

The quality of any title to real estate is a matter of opinion over which persons, learned in the law of real estate, may differ. Even though title to your property may appear to be perfect, there are many unknown risks that even the most thorough title search cannot uncover. For example, a party transferring title may have been legally incompetent or a deed could have been forged. Title insurance eliminates all of these risks and prevents losses in advance.

Claims against title, even when they are without merit, can involve lengthy and expensive litigation. If a loss claim is raised against an insured property, the title insurance company will not only compensate for any valid claims, but will also pay for legal fees and court costs to defend title.

Your mortgage lender will also want title insurance to protect its collateral, the title to your real estate, in case of foreclosure. Most mortgage lenders require title insurance, and the borrower is usually responsible for paying the premium for the lender's title insurance policy.

The premium that you pay for the title insurance policy is a one-time payment (unlike the annual premium renewals of most other forms of insurance). Also, as opposed to providing coverage for a specified, limited term, title insurance protects the property owner and/or the lender for the duration of ownership or interest in the property.

Now, contrast that with Hazard Insurance which is insurance that covers property damage caused by fire, wind, storms, and other similar risks. Very few people actually buy a pure hazard policy, but at a minimum you need one and your mortgage company will insist that you have one. Since you are paying for it, you should pay a little extra and get homeowner�s insurance whish is insurance that combines liability insurance and hazard insurance.

The settlement statement, commonly called the HUD, is nothing more than two pages of who got paid what out of the proceeds of the loan. If there is a first mortgage to be placed on the property, the seller and buyer must be provided with a settlement statement before the sale and mortgage are signed.

Hope this helps, and good luck.