What is Title?
Simply stated, “Title” means ownership of the property. If you have title, you have the right to enjoy, occupy and sell your property. Usually title is transferred to you by virtue of a deed, which is recorded by the title company in the county land records.
Prior to your settlement, a title examiner searches the county land records to examine title to the property and ensure there are no title defects.
What are title defects?
A title defect is anything that has occurred or may occur in the future that may encumber your right to use, enjoy or market/sell the property. Such title defects could cause you as owner to lose your property to a superior ownership interest or claim of title by someone else.
What is Title Insurance?
Title Insurance provides you the protection from any current or future title defects. If you possess an Owner’s Title Insurance Policy, the title insurance company will defend your interest in the property against any claim brought by another party. The title insurance company will also protect you against any financial loss as a result of any title defect.
If a title search has been conducted, why do I still need title insurance?
Even the most detailed title searches will not detect many possible title defects. The following are only a partial list of title defects which could not be uncovered by the most thorough title examiner:
- If the marital rights of previous owners been relinquished;
- Have the mortgages and judgments affecting the property been properly indexed in the land records:
- Forgery (are all signatures on recorded documents valid?);
- Fraud;
- Undue influence on a grantor or executor;
- Undisclosed or missing heirs;
- Birth of heirs subsequent to the date of a relevant will;
What kinds of title insurance are there?
There are three different types of title insurance, Lenders Title Policy (“Lender’s Policy”), Standard Owner’s Title Policy (“Owner’s Policy”), and the Enhanced Owner’s Title Policy (“Enhanced Policy”).
A Lender’s Policy is required by all lenders as a condition for the loan. This policy only covers the lender, in the amount of the loan. The Lender’s Policy is the standard ALTA 1992 Loan Policy. This policy protects only the lender, and only for the life of the loan, against certain possible defects which could jeopardize the Lender’s security in the property.
The Owner’s Policy is the Standard ALTA 1992 Owner’s Policy, protecting you from certain limited defects which may not be revealed in a title search. The Enhanced Policy is typically selected by the Purchaser and covers most title defects, and includes affirmative mechanics lien coverage.
When do I purchase title insurance?
An Owners Policy or Enhanced Policy is issued at settlement for a one-time premium paid at the time of settlement. Your policy protects you against prior title defects, or any claims against against your title, even those possibly raised after you sell property or pay off the loan. This is important because liability for title defects can service even beyond your ownership in the property. Although the Owner’s Policy requires only a one-time payment, the Lender’s Policy is only applicable to the current transaction. Therefore, you must pay for a new Lender’s Policy each time you get a loan.