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Title Insurance?

Title insurance is a policy that protects your legal rights to own, possess, use, control, and dispose of land.

There are two types of title insurance: owner’s and lender’s insurance. The owner’s policy insures the purchaser that the title to the property is free from defects or encumbrances that would make a title unmarketable except those found during the title search listed as exceptions in the policy. The seller in the transaction purchases owner’s insurance. A standard coverage insurance policy typically covers:

• Ownership – another party claims ownership rights on a property
• Public Record Error – a document is not properly signed or recorded
• Forgery, Fraud, and/or Duress – another party has owner rights in your property due to forgery or false impersonation
• Undisclosed heirs – an unknown heir claims ownership to the property
• Liens – a creditor from the previous owner attempts to enforce a lien
• Unmarketable Title – a defect in the title that makes it difficult to convey to another party
• Right of legal access – an owner does not have legal access to his/her property

A lender’s policy is purchased by the buyer of the property and insures the validity and enforceability of the lien of the lender’s mortgage or deed of trust. The lender is insured for the loan amount. As the loan is paid off, the amount of coverage decreases until the balance is paid off in which case the policy terminates.

The title insurance company receives an order for insurance on a particular property listed in the buy/sell agreement. Then, a title officer conducts a search of the documents recorded in public record pertaining to the property. Next, a preliminary report is issued to the parties involved in the transaction that lists the exceptions to coverage of the property.

It is the title company’s responsibility to uncover existing defects on the property. However, it is not the title company’s duty to fix the defects listed as exceptions to coverage. Certain title issues require legal advice and/or litigation.

The actual policy is issued when the ownership rights are transferred to the buyer and all previous liens and loans on the property are released or paid off.