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What is title insurance?

Why should I get it?

What is Title Insurance? 

 
A policy of title insurance offers protection to the home owner (through an Owner's Policy) and the lender (through a Loan Policy) from any claims to the insured property that existed prior to the date of the policy. Like other forms of insurance the home owner or lender (also known as the "insured party") pays a premium to obtain the policy of insurance. Unlike other forms of insurance, the insured party pays a one-time premium for the title insurance. The policy of title insurance remains in effect as long as you own the property.
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The policy of title insurance is issued after an experienced title examiner reviews the land records that relate to the property that is going to be insured. The results of the title examination are provided to the title company. The title company should be helpful in providing assistance to eliminate potential problems that appear on the title examination and that could delay the closing. The title company then issues its policy to protect insured parties against past occurrences that could result in future problems and it provides you with peace of mind that no one will make a claim to your property. The video below illustrates the importance of having title insurance for your new or next home.

What is the difference between an Owner's Policy and a Loan Policy of title insurance? 

 
An Owner's Policy is usually issued in the amount of the real estate purchase price. It is purchased for a one-time premium fee at closing and lasts for as long as you have an interest in the property. An Owner's Policy protects the buyer only, should a covered title problem arise. 
 
The Loan Policy is usually based on the dollar amount of your loan. It only protects the lender's interests in the property should a problem with the title arise. It does not protect the buyer.  Most lenders require a Loan Policy when they issue you a loan. 

Why do I need title insurance if my lender requires it? 

 
The lender’s title loan policy will not protect you. It only protects the lender, and only in the amount of the loan, which is typically less than the value of the property. In the event of an adverse claim, the lender will ordinarily not be concerned unless its loan becomes non-performing and the claim threatened the lender’s ability to foreclose and recover its funds. As you pay down your loan, the lender’s title policy coverage diminishes. Once your loan is paid off, there is no longer coverage. As long as you are the owner, your owner’s policy, however, remains in effect.

Why do I need title insurance if a title search was performed? 

 

A title search provides a thorough review or examination of the public records that pertain to real property ownership and the rights/limitations of its use. The search begins with the current owner and extends back in time for a period of time defined by the type of transaction. All documents affecting the subject property are reviewed for accuracy, completeness and proper execution. Similarly, all owners of record during the search period are indexed to determine their ownership interests, marital status, and legal and mental capacity to enter into a contract to buy or sell real property. Title Insurance provides coverage for errors in these public records, hidden defects not disclosed by the public records, missing or unrecorded documents, or mistakes made during the examination of the title to your property. Missing or unknown heirs, frauds or forgery, competency of grantors, tenancy of grantors, conveyances by minors, and a host of other issues cannot be detected by a search. Your owner’s title policy insures that if such an occasion arises, you will be defended, free of charge against all covered claims and paid up to the amount of the policy to settle valid claims. Your lender is aware of these possible defects, and therefore, will require that you purchase a lender’s policy of title insurance to protect their interest in the loan.

What is the difference between a "standard" owner's policy and an "enhanced" homeowner's policy? 

 

The Standard Policy addresses such risks as:
  • Forgery and impersonation
  • Lack of competency, capacity, or legal authority of a party
  • Deed not joined in by a necessary party
  • Undisclosed (but recorded) prior mortgage or lien
  • Undisclosed (but recorded) easement or use restriction
  • Erroneous or inadequate legal description
  • Lack of a right of access
  • Deed not properly recorded
 
The Enhanced Policy covers all of the above risks, plus:
  • Off record matters, such as claims for adverse possession or prescriptive easement
  • Deed to land with buildings encroaching on land of another incorrect survey
  • Silent (off-record) liens, such as mechanics or estate tax liens
  • Pre-existing violations of subdivision laws, zoning ordinances, or CC&Rs (Covenants, Conditions and Restrictions)
  • Post-Policy Forgery
  • Forced removal of improvements due to lack of building permit (subject to deductible)
  • Post-policy construction improvements by a neighbor onto insured land
  • Location and dimensions of insured land (survey not required)
•••• NOTE ••••
OTHERWISE INSURED POST-POLICY EVENTS ARE NOT COVERED IF THE MATTER IS CREATED BY THE INSURED OR OTHERWISE INCLUDED BY THE EXCLUSIONS UNLESS NOTED HEREIN.  SOME LIMITS MAY APPLY TO THE COVERAGES ABOVE.  FOR SPECIFIC QUESTIONS, PLEASE CONTACT AN INSIGHT TITLE COMPANY LICENSED TITLE AGENT AT 216-373-3170 OR InsightOrders@logs.com OR COMPLETED THE CONTACT US FORM HERE.  
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