Title Insurance, What is it?

Title insurance protects real estate owners and lenders against any property loss or damage they might experience because of liens, encumbrances or defects in the title to the property.

The title to a piece of property is the evidence that the owner is in lawful possession of that property. 

A title insurance policy insures the property against events that may have occurred to the property in the past. Title insurance unlike other insurance policies that are paid monthly or annually is a one time payment paid at the close of the escrow.

A few things that title insurance would cover are, improperly recorded documents, fraud, forgery, liens, encroachments, easements and other items that are specified in the insurance policy.

Buyers and lenders both need title insurance.

• A lender’s policy is generally required when a lender issues a mortgage loan. The loan policy is usually based on the dollar amount of the loan and it protects the lender’s interests in the property should a problem with the title arise. It does not protect the buyer. The policy amount decreases each year and eventually disappears as the loan is paid off.
• An owner’s policy, purchased at closing, provides coverage for the homeowner. It is usually issued in the amount of the real estate purchase and is valid for as long as the owner or his heirs have an interest in the property. Only an owner’s policy fully protects the buyer should a covered title problem arise with the title that was not found during the title search. Possible hidden title problems can include:
  • Errors or omissions in deeds
  • Mistakes in examining records
  • Forgery
  • Undisclosed heirs

Title insurance is not something that is required for you to purchase, but it is highly recommended. It is a one-time payment, and the policy lasts the entire time that you own the property.

To learn more about title insurance and to answer any questions you may have, visit Stewart.com and click on the Our Services tab.

Thank you to Stewart Title for information provided in this blog post.