What Is Title Insurance?

Before answering “what is title insurance,” it might be best to first answer, “What is Title?” “Title” is the ownership in real property. Among other things, it means that you have the legal right to possess, occupy, peacefully enjoy, and sell your property without interference from others, subject only to restrictions imposed by governmental authorities or previous owners. In most cases, title is transferred by deed which is recorded in the land records of the county in which the property is located. Generally, when property is sold, an attorney for the Buyer or a title examiner goes to the record room and searches the land records for any title defects. A title defect is anything in the entire history of ownership of a piece of real estate which may encumber the owner’s rights under the title. A title defect may cause the owner of the real estate property to lose all or part of his land & appurtenances to a superior ownership interest or claim of another. This is the type of loss against which title insurance protects.

In short, if you own a title insurance policy, the title insurance company will defend you, without cost, against an attack or claim upon your ownership interest in your property as insured and you will be protected against financial loss caused by a title defect.

If my title has been examined for defects, why do I need insurance?

There are many defects which even the most meticulous search of the land records will not uncover. For instance, it is impossible for an examiner to know whether the marital rights of all previous owners have been relinquished, or whether all deeds, mortgages, and judgments affecting the property have been properly indexed in the land records whether all signatures are valid; or whether an unknown heir of a previous owner had a valid claim against the property. Without owner’s title insurance you may have no avenue of recovery for these types of problems.

If I am required to purchase lender’s insurance, why do I need owner’s coverage as well?

In almost every instance, a lender will require you to purchase lender’s title insurance protecting the lender up to the value of their loan on the property. This coverage only protects the lender, not you, and the coverage diminishes as the loan is paid off. As you build more equity in the property, you expose yourself to a higher risk of loss occasioned by a title defect. In this situation, the protected lender will suffer no loss while you as the owner of record bear the substantial risk of the damage.