What is title insurance?
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. Title insurance differs significantly from other forms of insurance. While the functions of most other forms of insurance is to guard against future events (such as death or accidents or in the case of property, fire or flood), the primary purpose of title insurance is to eliminate risks and prevent losses caused by events that have happened in the past. To achieve this goal, title insurers perform an extensive search of the public records to determine whether there are any adverse claims to the subject of real estate. Those claims are either eliminated prior to the issuance of a title policy or their existe
Youve heard the story about the man who tried to sell the Brooklyn Bridge to anyone willing to pay the asking price. As a shrewd purchaser you would insist on getting insurance through a company that not only guarantees that the man really owns the bridge, but that there were no mortgages, liens, or other liabilities that would crop up after money changed hands and you became the proud owner of the bridge. Later, if someone came out of the woodwork and said the man had already sold him the bridge, there was a defect in the chain of title, or if a mortgage company, contractor, or lien holder said you owed money or started a foreclosure case against you, title insurance ensures you would not suffer a loss, and provides a legal defense on your behalf. Because title insurance provides valuable protection to you from many different kinds of loss that can threaten your ownership rights to property you buy, lenders almost always require you to obtain title insurance before they will loan mone
Title insurance offers you information on the status of the title to land before you buy and protection against claims that may affect the title after you buy. HERE’S HOW IT WORKS: Before your real estate transaction closes, the public records are searched to find all related official documents. These documents are then examined for their effect, and form the basis of the title insurance policy. The examination reveals the current status of ownership and encumbrances. It shows the current record owner, based on a careful evaluation of all records. It also shows the current limitations on that owner’s property rights, such as outstanding mortgages and utility easements. A buyer or lender knows that some of these limitations should be removed (by paying off and releasing a prior mortgage, for example), or they will continue to adversely affect the property after the closing.
