Why do I need title insurance?
Title insurance is an insurance policy or contract issued by a title company to protect the purchaser, owner or lender against a loss that may arise by reason of a defect in the ownership or interest in real property. In addition, title insurance companies agree to defend an owner or lender in court if there is an attack on the title of an insured property. This defense generally covers attorney and court expenses or pays a loss caused by the defect in title up to the face amount of the policy (subject to the terms listed in the policy).
What types of policies are available?
There are two basic types of title insurance policies: Owner’s Title Insurance and Mortgagee’s Title Insurance.
An owner’s title insurance policy protects the owner’s interest as the buyer or owner of the property. As an owner, you want to have the same assurance as the lender that the investment you have made cannot be lost because of a problem or defect with the title. Since most property owners mortgage or borrow money at the time of purchase or during ownership, the lender can be expected to request protection of its investment against loss. Lenders know that many things can cause loss of title or that expenses are incurred while defending an attack; they insist upon a mortgage title insurance policy to protect their loan secured by the property.
How does title insurance differ from other types of insurance?
Title insurance is different from other types of insurance in that it protects you, the insured, from loss that may occur from matters or defects in the past that affect your property. Other types of insurance (such as auto insurance, life insurance or health insurance) cover you against losses that may occur in the future. Title insurance does not protect against a defect that may originate after your closing.
Unlike premiums for other types of insurance, an owner’s title insurance premium is paid only once (at the closing) and the policy remains in effect throughout the owner’s ownership of the property.
What are some examples of problems title insurance protects against?
Examples of the types of title problems that may occur include the following.
- Document executed under duress
- Defective acknowledgments
- Deeds by minors
- Inadequate legal descriptions
- Easements and other rights and limitations established through continued use or that are not discovered by a survey or in the public record
- Easements and other rights and limitations of public record not discovered by a search of the public record
- Restrictive covenants of record that are not discovered by a search of the public record
- Mistakes in recording legal documents
- Mistaken reports furnished from taxing authorities
- Misinterpretation of wills
- Deed of community property recited to be separate property
- Errors in tax records (i.e., listing payment against wrong property account)
- Birth or adoption of children after date of will
- Falsification of records
- Undisclosed or missing heirs
- Errors in indexing of legal documents by the County
- Surviving children omitted from a will
- Deeds to or from defunct corporations
- Marital rights of spouse allegedly, but not legally, divorced
- Instruments executed under fabricated or expired powers of attorney
- Forged deeds, releases, etc.
- Deeds by persons supposedly single but secretly married
- Deeds from persons not competent to handle their affairs