Title Insurance

PROTECTING YOUR INVESTMENT

Title insurance is not as well understood as other types of property insurance, but it is
just as important. When purchasing property, you are purchasing the title to the
property, which is the right to occupy and use the property. The title may be limited
by rights and claims asserted by others, such as restrictions, which may limit your use
and enjoyment of the property and even bring financial loss. Title insurance protects
against these types of title hazards.

Other types of insurance that protect your property focus on possible future events
and charge an annual premium. On the other hand, title insurance protects against
loss from hazards and defects that already exist in the title and is purchased with a
one-time premium.

TYPES OF TITLE INSURANCE

Generally, there are two types of title insurance:

Lender’s Policy of Title Insurance, also called a Loan Policy, Most lenders require
a Loan Policy when they issue you a loan. The Loan Policy is usually based on the
dollar amount of your loan. It protects the lender's interests in the property should a
problem with the title arise. The policy coverage ends when the loan is paid off.

And

Owner's Policy of Title Insurance. Owner's title insurance is usually issued in the
amount of the purchase price of the property, or in some cases the appraised value of
the property. It can be purchased for a one-time fee at closing, usually at a reduced
premium when a Loan Policy is issued, and lasts as long as you or your heirs have an
interest in the property. This may even be after you, the insured, have sold the
property. Only Owner's title insurance fully protects the buyer should a problem arise
with the title that was not uncovered during the title search.

How Am I Protected?
In order to issue title insurance, the title company must search public land records for
matters affecting that title, A title search may also be referred to as an abstract of
title. Many abstractors search the "chain" of title back 50 years. Twenty-five percent
of title searches reveal a title problem that must be corrected before the insurance is
issued. Some examples of items that can cause a problem are: successions and trusts
that contain improper information; outstanding judgments or tax liens against the
property; and easements. Title companies cause the title curative work to be done in
order to correct the problems before issuing a policy of title insurance.

Occasionally, in spite of an exhaustive title search, hidden hazards can emerge after
closing. Things such as mistakes in the public record, previously undisclosed heirs
claming to own the property; or forgeries could cloud the title. Owner's title insurance
offers financial protection against these by negotiating with third-parties, and paying
claims and the legal fees involved in defending the title.