Title insurance can be easily misunderstood. A lot of the portions of title insurance are confusing to many. Title One Settlement Group strives to make sure you understand everything about title insurance. Below we have compiled a list of popular misconceptions in the title insurance industry. We acknowledge these misconceptions and address them so you are properly informed:
– The preliminary report does not represent the current state of title to the property. Neither the preliminary report nor the title policy contain representations of the state of title. The preliminary report is an offer to issue insurance subject to specific exclusions and exceptions.
– Title insurance is not similar to casualty insurance. Rather, it is “risk avoidance” insurance that provides indemnity coverage and defense to the insured for loss or damage directly incurred by the insured, or incurred as a result of a third party claim, from a covered risk that exists on the date of the policy.
– The term “public records” as currently defined in title policies is not synonymous with the chain of title. Public records include documents that provide constructive notice, but not every recorded document in the chain of title provides constructive notice.
– Title insurance coverage is not permanent and does not benefit subsequent parties. Owner’s policies generally only benefit the named insured and not voluntary transferees of the property. Although loan policies generally do benefit assignees of the loan, coverage may be lost or impaired because of future loan modifications.
(Facts courtesy of: http://blog.ceb.com/2011/09/02/dispelling-some-misconceptions-about-title-insurance/)