What is title insurance?
First, the word title is a collective term for all your legal rights to own, use, and dispose of land. Title includes all previous ownership, uses, and transfers. To legally transfer real estate property, a title search must be performed and, in most cases, the title must be found free of any circumstances that could endanger your right of ownership. Title insurance protects against the possibility of future loss should your legal rights to your property be challenged.
Title insurance is a form of insurance in which the insurer agrees to indemnify the insured party for any loss suffered that results from a defect in the title to the property that was unknown to the buyer at the time of the sale. A title policy of insurance insures the homebuyer against any encumbrances that may affect the title to their property. The policy is required by most institutional lenders in order to get a mortgage and will pay the value of the mortgage in the event that there is a defect in the title that voids the buyers title to the property. It is an alternative to getting a municipal compliance certificate or real property report.
Title insurance protects you from the ‘unforeseen risks’ that may arise from hidden claims that may be asserted against title to your property. Your title policy will protect you from financial loss associated with such claims and protect you from any undisclosed problems with the title. Unlike other forms of insurance which provide protection going forward, title insurance protects you from matters affecting title arising in the past.
Title Insurance is a policy that protects you against loss if any problems result in a claim against your ownership. These claims include fraud, improper court proceedings, missing heirs, incompetence of previous seller(s), recording mistakes, and unfilled liens. Title Insurance plays a major role in ensuring home ownership is safe and protected from these threats. The Title Insurance Company safeguards the homeowner against loss due to any defect in title. Should a discrepancy arise, it is the Title Insurance Company’s obligation to provide legal support to the homeowner.
Title insurance insures that your title is good both on and off the record, is not limited to the 50 year period required to be searched by the attorney, and protects against fraud and forgeries within the record. The bank will require that the buyer purchase title insurance from an approved title insurance company to insure its mortgage. This is known as Lender s Title Insurance. The buyer must pay the premium even though the policy only benefits the bank. However, at the closing the buyer has the opportunity to purchase Owner s Title Insurance that will benefit the buyer.
