WHAT DOES TITLE INSURANCE ACTUALLY INSURE?

Who needs title insurance?

Buyers and lenders in real estate transactions need title insurance.  Both want to know that the property they are involved with is insured against certain title defects. Title companies provide this needed insurance coverage subject to the terms of the policy.  The seller, buyer and lender all benefit from the insurance provided by title companies.

What does title insurance insure?

Title insurance offers protection against claims resulting from various defects (as set out in the policy) which may exist in the title to a specific parcel of real property, effective on the issue date of the policy.  For example, a person might claim to have a deed or lease giving them ownership or the right to possess your property.  Another person could claim to hold an easement giving them a right of access across your land.  Yet another person may claim that they have a lien on your property securing the repayment of a debt.  That property may be an empty lot or it may hold a 50-story office tower.  Title companies work with all types of real property.

What types of policies are available?

Title companies routinely issue two types of policies: An "owner's" policy which insures you, the homebuyer for as long as you and your heirs own the home; and a "lender's" policy which insures the priority of the lender's mortgage over the claims that others may have in the property.

What protection am I obtaining with my title policy?

A title insurance policy contains provisions for the payment of the legal fees in defense of a claim against your property which is covered under your policy.  It also contains provisions for indemnification against losses which result from a covered claim.  A premium is paid at the close of a transaction.  There are no continuing premiums due, as there are with other types of insurance.