Types of Title Insurance

There are two types of title insurance:

Owner’s title insurance, also called an Owner’s Policy, and Lender’s title insurance referred to as the Loan Policy.

            Owner’s title insurance is usually issued in the amount of the real estate purchase price.  It is purchased at a one time fee and paid at closing.  The policy will continue in force as long as you or your heirs have an interest in the property.  This may continue even after the property has been sold by the insured.  Only the Owner’s title insurance fully protects the buyer should a problem arise with the title to the property that was not uncovered during the title search.  Owner’s title insurance also pays legal fees to defend the title to the real estate in the event a claim against the real estate is filed.

Lenders usually require a Loan Policy when issuing you a loan.  The Loan Policy is based on the dollar amount of the loan.  It protects the lender’s interest in the property should a problem with the title to the property arise.  The policy amount decreases each year as the loan principal deceases until the loan is paid in full, at which time the policy is complete and released.

How Am I Protected?

            In order to issue a title insurance policy, the title company must search public land records for matters affecting that real estate title.  Many search the “CHAIN” of title back 50 years.  Twenty-five percent (25%) of title searches find a title problem that must be fixed before the insurance is issued, thus ensuring the title is correct.  Some common examples of items that can cause a problem are:  outstanding judgments or tax liens, wills and trust that contain improper information, easements, deeds, legal description errors.  The title insurance company will discover these problems during the search and then take the appropriate steps to correct them in order to a clear title policy.

                Occasionally, in spite of an exhaustive title search, hidden hazards can emerge after the closing.  Items such as: mistakes in the public record, previously undisclosed heirs claiming to own the property or forged deeds could cloud the title.   Owner’s title insurance offers financial protection against these events by negotiating with third-parties, paying claims and legal fees involved in defending the title to the real estate.

If you have more questions or issues concerning the purpose of TITLE INSURANCE, please contact us for information and explanations.    We will be glad to help you.