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 make 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.