Title insurance is an insurance policy that protects the homeowner against future loss should the title condition be any different than when the policy was written.

A home is one of the biggest investments that we make in our lives. Title insurance protects against the loss of value in this investment from hazards and defects that may exist in the title. These hazards can include fraud, forged signatures on deeds, unknown property heirs, liens, and documentation errors. If you were uninsured and your right to title is challenged, you could lose a significant amount of money on legal fees defending yourself, or you could even lose your home. Your mortgage lender will require a policy of title insurance for the loan to protect their interest in the value of your property, and a homeowner should purchase an owner’s policy for the very same reason.

Most insurance policies protect against losses that arise from potential future events. The primary purpose of title insurance is to prevent losses from defects in title arising out of past events.

Yes and no. While a lender will usually require a loan policy of title insurance, the purchaser can choose what type of owner’s protection, if any, to use regarding their title. However, without an owner’s policy, the homeowner will not be protected against hidden title hazards, reimbursed for legal expenses for defense, or claims that affect the value of the property.

An owner’s policy of title insurance requires the insurance provider to pay for defending against any lawsuit attacking your title as insured and will either clear up title problems or pay the insured’s losses. For a one-time premium that is generally paid at closing, an owner’s title insurance policy remains in effect as long as you, or your heirs, retain an interest in the property.

From the lender’s standpoint, a refinanced mortgage is a brand-new mortgage – complete with the same risks that may have been present originally. During the refinance process, your original mortgage is paid off – and your existing lender’s title insurance policy is rendered invalid. However, if you purchased an owner’s policy of title insurance at your original closing – that policy will remain in effect if you or your heirs still own the property.

Less than you think. Charges vary in different sections of the country, but the cost of title insurance (including the search, examination, and related services) amounts to about one percent or less of the property’s cost. And unlike other insurance premiums, which must be paid annually, a title insurance premium is a one-time payment , usually at settlement.

Homeowner’s insurance typically provides protection against theft, accidental damage, or natural disaster. While these types of loss can certainly be substantial, losses from a defective title could be devastating. A home destroyed by fire can be rebuilt; but if the title to the land fails, without title insurance, the homeowner could lose the right to inhabit the house and the land it occupies.

The lender’s policy of title insurance lasts until the mortgage is paid in full. However, the owner’s policy of title insurance lasts for as long as the homeowner or their heirs retain an interest in the property. Unlike other types of insurance, a title policy never goes out of effect. Even if the insured sells the property and goes out of title, the policy insuring him still is in effect via the deed he conveys the property with.

Only the lender is covered by the Mortgagee’s Title Policy; the Owner’s Title Policy protects both the buyer and the seller.

A title insurance policy provides coverage from the time of its effective date back to the origin of the title. After the property has passed to a homeowner’s heirs, if any defect prior to the policy should arise, the title insurance company would defend the title for the heirs as it would for the homeowner.

Yes. Easements, deed restrictions, zoning requirements, mortgage liens, and certain other categories of limitations on the use of property are specifically exempted, or otherwise not covered. Consult with your title insurance agent for full information on policy exemptions.

A homebuyer can obtain title insurance from any licensed title insurance company. When choosing a title insurer, it is important to look for a company with expertise and experience, as well as the financial strength to provide protection should a claim arise. A real estate broker or attorney can help you find a good title insurance company.

A title search is a detailed examination of a property’s historical records, including deeds, court records, and many other documents. The purpose of this search is to verify the seller’s right to transfer ownership, and to discover any claims, defects, and other rights or burdens on the property.

A title search can show title defects and liens, as well as other encumbrances and restrictions. These include any unpaid taxes, unsatisfied mortgages, judgments against the seller and restrictions limiting the use of the land.

A title policy ensuring the seller does not protect the buyer. Also, many things could have happened to the land since that owner’s policy was issued. Your seller could have a mortgage, a home equity loan, judgments, or unpaid taxes that would not be covered in the seller’s title policy.

A title defect occurs when information is missing from a title, such as the existence of a previous owner’s undisclosed heir who could then make a claim on the land. An encumbrance is a claim made upon the land by a party other than the landowner. For instance, a local utility company may have an easement for utilities run to a house. When a potential homeowner is borrowing money, the lender will require the title to be cleared of any outstanding defects or encumbrances before the land is transferred and the loan approved.

A title opinion is the judgment of a trained professional – often an attorney – based on a search of public records. A title opinion only protects against loss related to the oversight of the individual making the opinion, not against hidden hazards.

Since various rights to the land (such as mineral, air or utility rights) may have been acquired by others, it is necessary to determine whether any rights are outstanding to ensure transfer of a clear title.