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What is Title Insurance?

What is title?

Title is the “bundle of rights” that constitutes ownership of a specific property. It is the owner’s right to possess and use the property.

Doesn’t a deed prove ownership?

No. A deed only conveys the ownership rights that the person signing the deed possesses. It is not proof that the person signing the deed is actually the owner. From the deed, you cannot determine what rights, liens, or claims others may have in the property.

What is a title search?

A title search is a thorough, detailed examination of the public historical records of a property to determine the status of the title of that property. It is designed to verify the seller’s right to transfer ownership as well as to discover any claims, defects, and other rights or burdens on the property. A title search may reveal unpaid taxes, unsatisfied mortgages, judgments against the seller, and unpaid special assessments. It may also reveal any restrictions limiting the use of the land, such as right of way for a road or power line, air rights or an easement for a driveway.

Does a title search reveal all defects in the property?

It may not. For instance, there may be undisclosed heirs; the previous owner may have incorrectly stated his marital status; a prior owner may not have been mentally competent, or may have been a minor. There may have been a fraudulent transfer in the past, or a forgery. Confusion due to similar or identical names may have caused someone to overlook a lien, or there may have been errors in the county records such as a wrong indexing. Discovery of any of these defects can arise after you have purchased the property and can jeopardize your rights.

What is a Preliminary Title Report?

A preliminary title report, or “Prelim,” is a commitment from the title insurance company to provide a policy. It is based on stipulated facts and certain exceptions from coverage. A Prelim is issued prior to the title insurance policy, and discloses the status of title to the parties contemplating a transfer or a new loan.

What is title insurance?

Title insurance is a contract issued following a title search to safeguard the insured’s rights of ownership or interest in the property. A title insurance policy minimizes risk and protects those insured from matters of public record except matters specifically reserved from the policy’s coverage. Title insurance also protects against specified losses that a title search might not reveal. Fraud, forgery, mental incompetence of former owners, missing heirs and defective deeds are examples of hidden defects which can threaten ownership but are all included within the coverage of a title insurance policy. Should a claim arise against your title, title insurance guarantees to satisfy any valid claim up to the value of the policy. Title insurance also provides for payment of legal defense against the claim, court costs, and related fees. It is important to note that title insurance does not insure the value of the property itself. Title insurance only insures up to the face value of the policy.

Are there different types of title insurance policies?

Today there are two basic types of policies – owners’ policies and lenders’ policies. The owner’s policy insures a new buyer’s investment up to the amount of the policy. The lender’s policy protects the lender’s interest in the property as security for the outstanding balance of the loan.

How much does title insurance cost, and who pays for it?

The cost of the title insurance policy, including title search, preliminary title report, and related services, is a small fraction of the acquisition cost of the property. Traditionally, the seller pays for the owner’s policy. The premium is a one-time charge based on the purchase price of the property. The buyer/borrower usually pays the premium for the lender’s policy, a one-time charge based on the loan amount.

How long does a title insurance policy last?

Once issued, a title insurance policy entitles an owner to continuous protection for as long as the owner or his heirs possess an interest in the property. The lender’s policy remains in force until the loan is repaid or released. Where do I get title insurance? Title insurance is issued by licensed title insurance companies and their agents.