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Why Title Insurance? PDF Print E-mail

There are two types of title insurance: Owners coverage and Lenders or Mortgagee coverage.

First AmericanOwners title insurance ordinarily is issued for the amount of the purchase price of the real estate and protects the insured--or his/her heirs--even be after the insured has sold the property.

The amount of lenders title insurance is issued for the amount of the mortgage on the property and decreases and eventually disappears as the loan is paid off. Most lenders require mortgagee title insurance as security for their investment in the property, just as they may require fire insurance and other types of coverage as investor protection.

Eliminating risk before issuing a title insurance policy is an important part of title insurance. This means the insured has the best possible chance for avoiding a title claim and loss. Insuring a title begins with a search of the public records for matters affecting the title to the real estate involved. The examination of title. Frequently, instruments that don't clearly pass title are found in the chain, or history, of ownership assembled from the search of the records. These need to be corrected before a clear title can be conveyed.

Some examples of instruments that can present concerns are:

  • Documents that contain improper vestings and/or incomplete or incorrect names and/or signatures 
  • Absence of signatures of previous owners conveying their interest in the property
  • Outstanding mortgages judgments and liens
  • Unopened successions of deceased persons having an interest in the property
  • Easements
  • Incorrect notary acknowledgments.

Through the search and the examination, title problems like these are disclosed so they can be cleared up before closing. But even the most careful preventive work cannot locate hidden hazards of title. In spite of all the expertise and dedication that go into a search and examination, hidden hazards can emerge after completion of a real estate purchase, causing an unpleasant and costly surprise.

Some examples include:  

  • Forged signatures on transfer documents
  • Previously undisclosed heirs with an interest in the property
  • Instruments executed under expired or fabricated powers of attorney
  • Errors in the public records

A title insurer offers financial protection to property owners against these and other hidden hazards by negotiating with third parties making claims against the property, payment of costs incurred in defending against an attack on the title, and payment of claims.

If buyers elect to purchase owner's title insurance at the time of closing, they can enjoy complete protection against claim and loss. Make sure you are fully protected. Insist on an owner's title insurance policy.

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