Title insurance is an indemnity policy that protects you or your mortgage lender against problems relating to the property’s title prior to the date of the policy. For example:
- If someone forged a signature in a past transfer of the title from one owner to another
- Unpaid real estate taxes on the property
- Liens against the property that are unresolved (e.g. mortgages not satisfied at closing)
Unlike home insurance and car insurance, which focus on possible future hazards and charge an annual premium, title insurance is a safeguard against loss from hazards and defects already existing in the past. We, as a title company, research the history of your title, discover any recorded defects or liens in title and remove or cure them at or before closing.
Basic Owner’s Title Insurance covers:
- Title to the property
- Incorrect signatures on documents
- Forgery, fraud
- Defective recordation
- Restrictive Covenant
- Encumbrances or judgments against the property
Basic Lender’s Title Insurance Covers:
- Mechanics liens
- Unpaid taxes or assessments
- Insures valid priority of lien as requested by lender
Title insurance protects you (or your lender) if a lawsuit is filed against the title.
Owner’s title insurance, issued in the amount of the real estate purchase, can be bought for a one-time fee and lasts as long as you have an interest in the property. Owner’s title insurance protects you if a problem surfaces with the title that was not uncovered during a title search and indemnifies for any legal fees involved in defending a claim against your title to the property that was not excluded from coverage.
Anything you might want to know about your property or its “chain of title” is usually found in a public records search. These things are then disclosed on a preliminary title commitment issued by the title company to the seller, borrower, lender, broker and/or real estate agent. The title company then works to remove certain exceptions to clear title (like open mortgages) or cure defects in the chain of title (like removing a deceased person’s interest in title).
Buyers need to have confidence in the purchase of their home and title insurance protects the value of that most important of investments!
Lenders will almost always require a lender’s title insurance policy on any purchase, mortgage or refinance. Borrowers must remember, though, the lender’s policy does NOT insure their ownership interest – it only insures the lender’s interest in the loan secured by the mortgage being insured.