It is an insurance policy that protects the insured against loss should the condition of title to the land be other than as insured. Unlike other types of insurance that offer protection against future possible occurrences, title insurance offers protection against past occurrences which could result in a claim at a future date. Coverage remains for so long as you have an interest in the covered property. If you should die, the coverage automatically continues for the benefit of your heirs. If you sell your property, giving warranties of title to your buyer, your coverage continues. Likewise, if a buyer gives you a mortgage to finance a purchase of covered property from you, your coverage continues to protect your security interest in the property. Title insurance provides the insured with "peace of mind" in knowing that you are receiving a good and marketable title to the property you are purchasing.
Why Do I Need Title Insurance?
When you buy a home, or any property for that matter, you expect to enjoy certain benefits from ownership...to be able to occupy and use the property as you wish, to be free from debts or obligations not created or agreed to by you, and to be able to freely sell or pledge your property as security for a loan. Title insurance is designed to cover these rights. Without an owner's title insurance policy, you may not be fully protected against errors in the public records, hidden defects not disclosed by the public records, or mistakes made during the examination of the title of your new property. As a result, you may be held fully accountable for any liens, judgments or claims brought against your new property. However, 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.
What Types of Risks does Title Insurance Cover?
Standard Coverage addresses such risk as:
Forgery and impersonation
Lack of competency, capacity or legal authority of a party
Deed not joined in by a necessary party (co-owner, heir, spouse, corporate officer, or business partner)
Undisclosed (but recorded) prior mortgage or lien
Undisclosed (but recorded) easement or use restriction
Erroneous or inadequate legal descriptions
Lack of a right of access
Deed not properly recorded
First American's Eagle 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 mechanic's or estate tax liens
Pre-existing violations of subdivision laws, zoning ordinances or CC&R's (Covenants, Conditions and Restrictions)
Post-policy forgery
Forced removal of improvements due to lack of building permit (subject to deductible)
Post-policy construction of improvements by a neighbor onto insured land
Location and dimensions of insured land (survey not required)
What Does Title Insurance Cost?
The cost varies, depending mainly on the value of your property. The important thing to remember is that you only pay once, then the coverage continues in effect for as long as you have an interest in the covered property. If you should die, the coverage automatically continues for the benefit of your heirs. If you sell your property, giving warranties of title to your buyer, your coverage continues. Likewise, if a buyer gives you a mortgage to finance a purchase of covered property from you, your coverage continues to protect your security interest in the property.
If My Lender Obtains Title Insurance Why do I Need it?
The lender's policy covers only the amount of its loan, which is usually not the full property value. In the event of an adverse claim, the lender would ordinarily not be concerned unless its loan became non-performing and the claim threatened the lender's ability to foreclose and recover its principal and interest. And in the event of a claim, there is no provision for payment of legal expenses for an uninsured party. When a loan policy is being issued, the small additional expense of an owner's policy is a bargain.
If I Have a Problem, Will I Lose My Property to Make a Claim?
Not at all. At the mere hint of a claim adverse to your title, you should contact your title insurer or the agent who issued your policy. Title insurance includes coverage for legal expenses that may be necessary to investigate, litigate, or settle an adverse claim.
