What is title insurance?
Title insurance provides the lender and the buyer (if you purchased owner’s coverage) with coverage for losses resulting from title defects listed in the policy. If a title error has occurred, it may be that someone else has an interest in the property, that improvements encroach on property lines, or that other similar problems may exist. Without title insurance you could lose your investment in your home. Lender’s coverage protects the lender. Owner’s coverage is optional and provides separate coverage for the borrower.
Title insurance insures your ownership rights in the property. More specifically, it insures the ability of past owners to pass ownership rights on to you. It also insures you against loss from easements of public record which were not included in the title report, like a utility easement through your living room.
Most buyers want to obtain clear title to the property. Free of liens, unpaid taxes, judgements, etc. To get clear title it is necessary to have all unacceptable claims, liabilities and charges against the seller’s title removed before title is transferred to the new owner. A title insurance company will for a fee or premium investigate the title and assist the removal of liens, etc. The title insurance company issues an insurance policy to the buyer guaranteeing clear title.
Title insurance is simply a contract between the insured and the title company. The insured agrees to pay a premium for the title policy. Should the title to the property or mortgage insured be questioned, the title company agrees to defend the title in court or to make good any loss suffered because of the title being defective. The amount of coverage is up to the face value of the policy, according to the terms of the policy. The issuance of title insurance is not merely guess work, nor is it a wager. It is based upon careful examination of the official records of property titles, and the judgmental decisions made by skilled title examiners.
