| A title insurance policy is a contract by which the title insurance company agrees to indemnify the insured against losses incurred by reason of defects in the title, other than those listed in the policy. Unlike other forms of insurance against events that might occur in the future, title
insurance insures against any defects, which have occurred prior to the insured's interest in the property.
Normally, the seller will pay for a purchaser's Standard title policy for the
buyer at the time of closing. If the buyer is getting a loan from a lending
institution, the lender will usually require that the buyer furnish an Extended
"ALTA" policy on its behalf, also issued at closing. Policy formats and
coverages are determined by the American Land Title Association (ALTA),
which provides nationwide uniformity and maximum coverage for lenders.
Policies typically insure against any loss by reason of title (ownership) to the
estate being other than stated, any lien or encumbrance of public record not
stated, lack of access to and from the land, priority of the insured mortgage
or trust deed being other than stated, any defect in the execution of the
insured mortgage or trust deed, any statutory lien for labor or material which
has gained or may gain priority over the insured loan.
Title insurance policies normally do not cover losses arising from public land
use controls, zoning, governmental rights, police power or eminent domain,
liens or encumbrances created by or agreed to or known by the insured at
the time of the policy, claims of usury, violations of the Truth-In-Lending-Law,
and encumbrances mentioned as exceptions. If an Owner's Extended Policy
has been requested, a physical inspection will be done. If the inspector
detects an unrecorded easement or other evidence of outstanding rights that
could affect the ownerıs title and possibly the value and intended use, the
title insurance company tells the buyer of these things before he or she
closed the purchase. Title insurance can protect the buyer from unrecorded
easements or rights, if not disclosed on an Ownerıs Extended Policy.
Why Do You Need Title
Insurance?
You need title insurance because any home, no matter how new or
apparently secure, is built on land as old as the earth itself. Undoubtedly,
this land has had many previous owners. Claims against any one of these
persons can be filed against the property and against you as the present
owner. Such hazards as fraud, missing heirs, old liens and many others can,
and often do, arise like ghosts out of the past.
Title insurance protects you against claims and title faults. It makes your
home safely yours. Your title insurance policy is your shield of protection
and will defend your ownership against loss. You pay one premium only
your protection and peace of mind last as long as you and your heirs remain
in ownership.
How Much Will Title
Insurance Cost?
The title insurance premium is determined by the amount and type of
coverage to be provided. Unlike other types of insurance, the premium for
title insurance is paid only once and coverage lasts as long as the insured
holds an interest in the property.
Who Pays for Title
Insurance?
Customarily, the seller pays for the title insurance premium that protects the
buyer's title to the property. If the buyer is obtaining a loan to purchase the
property, the lending institution will usually require a title insurance policy to
protect their collateral interest in the property. The buyer is responsible to
pay for the lender's title policy as one of the costs of borrowing the money,
unless the seller has agreed to pay that portion of the buyerıs closing costs.
How Long Does Title
Insurance Last?
Title insurance lasts as long as the insured has an interest in the property.
For the buyer, the policy is in effect for as long as the buyer or his/her heirs
own the property. For the lender, the policy is in effect until the loan is paid
in full.
What Type of Policy
Does My Customer Need?
Owner's policies are issued to buyers of real estate when they have the title
to the property conveyed to them by deed or real estate contract. A lender's
policy is issued to the lender to protect their interest in the property secured
by a deed of trust or a mortgage. Most lenders usually require a Lender's
Extended Coverage Policy, which provides additional protection against
special risks.
An Owner's Extended Coverage Policy provides the same coverage as an
Owner's Policy and also provides additional risk protection to cover losses
such as questions of survey, including lot size, location of boundaries and
easements, unrecorded liens for labor and materials, parties in possession
of the property not disclosed by public records and breach of covenants,
conditions, and restrictions.
There is an additional premium for an extended coverage policy to cover the
additional risks. A survey commonly called an "ALTA" survey may be
required to issue an Owner's Extended Coverage Policy. Due to the
additional costs of the premium and survey, careful consideration should be
given to specifics of the property and buyer's intended use of the property
before Owner's Extended coverage is ordered.
If the Seller Was
Insured When the Property Was Purchased, Why Should He/She Have
the Title Policy Re-issued to the New Buyer of the
Property?
The coverage of the title policy is against all matters that appeared of record
up to the date of issuance of the current owner's policy. Since that time
many documents may have been recorded, some of which may affect the
title to the land. Taxes and assessments may have accrued and be unpaid.
There may have been actions in court affecting the sellerıs title. The
purchaser is entitled to have full information and protection as to the
condition of the title right up to the date of his/her purchase. In addition,
there may be matters of record, which would prevent either the seller or
buyer from selling, buying or mortgaging land until such matters have been
cleared. These items include such things as federal tax liens, judgments,
incompetencies, divorce actions and other conditions, which the title search
may disclose.
| 
