What Is Title Insurance?

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Title insurance insures the purchaser’s of real estate and mortgages against loss from defective titles, liens and encumbrances. 

Protecting purchasers against loss is accomplished by the issuance of a title insurance policy, which states that if the status of the title to a parcel of real property is other than as represented, and if the insured suffers a loss as a result of title defect, the insurer will reimburse the insured for that loss and any related legal expenses, up to the face amount of the policy.

RISK ELIMINATION BEFORE INSURING

An important part of title insurance is its emphasis on risk elimination before insuring.  This means the insured has the best possible chance for avoiding title claim and loss.

Title insuring begins with a search of public land records for matters affecting the title to real estate concerned.  The examination of evidence from a search is intended to fully report all material objections to the title.  Frequently, instruments that do not clearly pass title are found in the chain, or history, of ownership assembled from the records in a search.  These need to be corrected before a clear title can be conveyed.  Following are examples of instruments that can present concerns:

-  Deeds, Wills and Trusts that contain improper vesting and incorrect names

-  Outstanding mortgages, judgments, contractor liens, tax liens

-  Easements

-  Incorrect notary acknowledgements

Through the search and the examination, title problems like these are disclosed so they can be cleared prior to closing on the transaction.  But even the most careful preventive work cannot locate hidden hazards of title.

POTENTIAL HIDDEN TITLE HAZARDS AND UNPLEASANT SURPRISES

In spite of all the expertise and dedication that go into a search and examination, hidden hazards can emerge after completion of a real estate transaction, causing an unpleasant and costly surprise.  Some examples include the following:

-  A forged deed that transfers no title to real estate

-  Previously undisclosed heirs with claims against the property

-  Instruments executed under expired or fabricated power of attorney

-  Mistakes in the public records

Title insurance offers financial protection against these and other hidden hazards through negotiation by the title insurer with third parties, payment for defending against an attack on title as insured, and payment of claims.

BENEFITS OF TITLE INSURANCE

The purchaser of real estate needs protection against potential title defects to the property purchased.  A title insurance policy will cover both claims arising out of title problems that could have been discovered in the public records, and those so-called “non-record” defects that could not be discovered in the public record, even with the most complete property search.

A title insurance policy will not only protect the insured owner, but also that person’s heirs for as long as they hold title to the property, and even after they sell by warranty deed.  Title insurance will satisfy any valid claim made against the insured’s title, including all costs and legal expenses of the defending against a title claim.

Because of title insurance, home buyers can enjoy complete protection against claim and loss.  Title insurance is a safeguard that is essential to secure your investment.