The question of the week, “What is gap coverage and how does it work?”
The Gap Between the Closing and Disbursal of Funds
Title insurance insures the purchaser’s ownership (or a lender’s mortgage) as of the date and time of recording of an insured instrument (defined in a title insurance policy as the “Date of Policy”). There is often a gap in time between the actual closing and disbursal of funds, and recording of the deed or mortgage at the county. Title insurance insures this “gap” in time should a title defect arise prior to the new deed of mortgage being filed.
There is no additional cost as this gap coverage is included as a Covered Risk in the Policy. It has been a part of normal day to day operations in most markets where roundtable closings are the norm.
Why Has This Become a Common Question Now?
Gap coverage has been a frequent question this week in NE Ohio. All are used to filing the same day of closing and not disbursing until the deed has filed. This has been the normal practice and custom but not the only way to close.
Some counties have prohibited public access to county office buildings, thus filings are dropped off and processed as the county is able. As a result, the current process in NE Ohio is to update the title exam on the day of closing and once all terms have been met, and we have an “OK” from the lender to disburse, the transaction is considered closed and funds disbursed. The deed and mortgage are submitted to the county for recording. The buyer’s ownership is insured as of the date of closing and the gap between closing and recording is covered by the title insurance policy. Nothing additional needed and no extra cost. Just part of the normal closing process.
For more information about the home-buying process, including Why Do I Need Title Insurance?, Tips to Ensure a Timely Closing, and Duties and Roles of a Title Company, visit our blog.