Title Insurance

Title Insurance

The title insurance policy that should be of concern to most individuals and homeowners is the "owner's policy of title insurance." An owner's policy of title insurance guarantees that the seller of the property has a good, marketable title to the property and that there are no unknown liens or encumbrances on the property.

The title insurance company will defend the buyer's interest in the property if there are defects in the title or ownership of that property. The insurance company agrees to pay the loss caused by the defect in title up to the face amount of the policy (that is, the maximum dollar amount of the coverage purchased), subject to the terms listed in the policy. The title insurance company also agrees to defend the owner or purchaser in court if someone brings a lawsuit that attacks the title to the property. As a part of its defense, the insurance company the attorney's fees and court expenses incurred defending such a lawsuit.

If you are buying real property and have a loan, your mortgage company will require you to purchase a lender's policy of title insurance. A lender's policy also insures against defects in the title, but it protects only the mortgage lender's interest. Your real estate closing attorney will ask you if you want to purchase an owner's policy of title insurance at the same time. There are several reasons why it is a good idea to purchase an owner's policy. A few are listed below:

  1. The cost of purchasing an owner's policy at the same time you purchase a lender's policy saves you money. Before a title insurance policy may be issued, the title to the property is examined to find any defects in the title. To issue an owner’s policy after closing, you would have to pay to have the title search done a second time.
  2. The cost of an owner's policy is minimal, compared to the protection offered. The premium for an owner's policy is seldom more than a few hundred dollars (more than the cost of the lender policy) and is a one-time payment. That policy will offer protection against defects in title caused by:

- An encumbrance; such as a lien, or a mortgage, created after your deed or mortgage is executed, but before it is recorded.
- Forged documents; such as deeds, mortgages, satisfactions, or releases of mortgages.
- Failure of the spouse of a prior owner to join in a conveyance.
- Undisclosed or missing heirs who claim an interest in the property.
- A deed from someone legally incapable of making a deed; such as a minor, or a person of unsound mind.
- Errors in the recording or drafting of documents.
- Liens for unpaid taxes; including estate, inheritance, income or gift taxes.
- Unknown claims, not a part of any public record.
- Unprobated wills.

In addition, enhanced owners policies also offer coverage for municipal violations, boundary line issues and many other ownership concerns. A real estate closing lawyer can help you with information specific to your situation. For more information on these policies, visit the Web sites for the Chicago Title Insurance Co. or the First American Title Insurance Company.

An owner's policy of title insurance will protect your interest in property against any of these defects. It is a small price to pay for the protection of your large investment.


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