Introduction to Title Insurance
Title insurance is unique. Unlike other types of insurance coverage a title policy provides protection from the consequences of past events. And unlike other types of insurance, you make only one premium payment for a lifetime of coverage.
Title Insurance Protects Your Right of Ownership
Title insurance protects your title to a property from legal challenges that might arise from an illegal or erroneous transfer of title before you bought the property. Title insurance covers your legal fees and, up to the limit of coverage, the cost of any related judgments against your property.
Common Title Defects
Here are some of the most common hidden risks that can cause a loss of title or create an encumbrance on title:
- Instruments executed under invalid or expired power of attorney
- Undisclosed or missing heirs
- Mistakes in recording legal documents
- Misinterpretations of wills
- Deeds by persons of unsound mind, by minors or by persons supposedly single, but in fact married
- Liens for unpaid estate, inheritance, income or gift taxes
- False impersonation of the true owner of the property
- Forged deed, releases or wills
Title insurance protects you from claims arising from any one of these events if the event took place before you bought the property.
Types of Title Policies
Anyone who has a financial interest in the property should have title insurance. On most residential properties, there are two parties who need coverage: the lender and the homeowner. The lender needs protection only for the amount of the loan. The face amount of the lender's policy decreases as you pay down the mortgage.
As the homeowner, you should have an owner’s policy for the purchase price of the home. It’s a good idea to talk to your attorney about your title protection. Ask whether or not it makes sense to add a survey endorsement or an inflation rider to your owner's policy. And, be sure to read the title binder before the policy is issued to find out what restrictions apply.
For more information see the Title Insurance Process.