Title Insurance is a contract between the insured and the title company. Under the terms of the contract the insured agrees to pay a premium and the title company agrees to defend the title or pay losses the Insured may suffer if the title is challenged or defective.
Is there more than one type of title insurance policy?
Yes. The most often requested policies are:
* Owners Title Policy - Protects the owner of the property while he is the owner and after the property is sold.
* Mortgagee (Lender) Title Policy - Protects lender from loss if it is determined that its lien is not valid or is inferior to another lien not shown as an exception to coverage on the policy.
What is the amount of coverage?
* Owners Title Policy - The policy will be issued in the amount of the current sales price. If there is no sale, the policy must be issued for the fair market value of the property.
* Mortgagee (Lender) Title Policy - The policy will be issued in an amount equal to the current outstanding loan balance.
Is title insurance just like other insurance?
No. Title Insurance insures against events that happened in the past that affect title to the property. Other types of insurance protect against events in the future.
How does a title company determine if it will insure the property?
Before issuing a title policy a search is made of county real property records. This search is done by using the company abstract plant which maintains references to deeds, mortgages, liens, deaths, divorces, etc. which might affect the property. These instruments are examined by the title company. The results of the examination determine whether the title company will issue a policy and what exceptions to coverage will be taken in the policy. The search and the commitment are not representations as to title but are done for title insuring purposes.
Can you get title insurance on any property?
No, Title Insurance is not intended for titles known to be bad or defective.
Can a defective title be restored?
Sometimes. Depending on the nature of the title defects, they may be corrected with the assistance of an attorney of the seller's choice. Correction methods include affidavits, correction deeds and other documents. Court action may be necessary. Many times the commitment for title insurance will list what items or actions would be necessary to remove the matter in question as an exception to coverage. The title company does not cure bad titles or write legal papers. Documents required by the title company are not meant to cure a title defect, they are required to satisfy the title company that the property is insurable.
Why buy a title policy if a search has already shown that the records and title is found to be good?
There are many hidden defects which may affect title to real estate. Some examples are:
Defects may not appear in the records and may not be picked up by even the most thorough search.
Can I afford title insurance?
Yes, there is a one time premium for coverage. There are no annual renewals. Compared to the costs of a loss, the expense of the premium is a bargain.