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Just as real estate titles are subject to record errors, prior liens and other encumbrances, ship and boat titles can have hidden problems that can become a liability for new shipowners. The best way for buyers of watercraft ships, yachts and boats to protect themselves from these liabilities is by purchasing title insurance. Agencies that provide this type of insurance conduct a thorough check of title history to ensure that the ship’s title is in “good standing.” Vessel title insurance also ensures financial protection to vessel owners in the event of a lawsuit or other financial loss due to complications with the title.
Why do sailing vessels need title insurance?
There are a variety of problems that can occur on a boat title. Buyers of ships are usually unaware that any of these problems exist – until they are hit with a foreclosure lawsuit or prior lien charges. Insurance agencies hire underwriters and title attorneys to investigate the chain of title ownership to uncover these problems — and resolve them — before the sale occurs.
Common problems with yacht and vessel titles include:
Danger. Forged or fraudulent documents can occur at any point in the ownership history. Ship brokers or previous owners sometimes attempt to sell ships under false titles, deceiving both the ship mortgage lender and the new owner. In some rare cases, the history of the ship’s ownership may appear as a mortgage fraud. Additionally, watercraft may be registered with both the US Coast Guard and the state, allowing vessels to hold more than one “legal” title. There may be multiple mortgages on more than one title for which the owner of the ship may be held responsible.
ownership dispute. Even if a ship owner has documentation and a valid Certificate of Federal Boat Registration, he may still be subject to ownership disputes. These documents do not have final authority to determine ownership; Only the underlying contract of the yacht or vessel can determine ownership. If the underlying contract of vessel title is drawn on fraudulent documents, the buyer’s title may be void.
Pre-existing mortgage or lien. The new owner of a vessel is held responsible for any unpaid taxes, unpaid mortgages and unpaid contract work associated with the title of the vessel, even if he was not privy to them at the time of purchase.
Watercraft buyers may wish to ask for a title opinion before finalizing the sale. While a good opinion provides some assurance against disputes, ship title opinions and summaries may not always be reliable. Erroneous records, improper documentation, fraud and human error can lead underwriters to draft faulty title opinions. The only way for a yacht or boat buyer to protect themselves from these complications is by purchasing vessel title insurance.
How does boat title insurance protect me?
In addition to conducting a thorough investigation of the ship’s ownership history before the sale is completed, title insurance companies provide financial compensation in the event of a lawsuit. Vessel title insurance usually covers the cost of legal defense against attacks on the title of the vessel; Additionally, the insurance will provide compensation for any financial or property losses caused by a defective title.
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