Title and Title Insurance

When you purchase a home, you are acquiring legal title to that property. Title is defined as the formal right of ownership of property.

In basic terms, title insurance is a policy that protects you against damage or loss resulting from defects that may exist in the title. These defects in title can result from things such as fraud, documentation errors, undisclosed heirs, liens or encumbrances on the title, and any other matter affecting the title to the property or the right to the use and enjoyment of property.  A title search will help to identify these potential issues with the title. It is done by examining public records to look up the ownership history of the property and to assure the seller has saleable interest.  However, even the best search, done by the most experienced title professional cannot guarantee that no title issues exist.  Title Insurance will protect you against these unforeseen risks.

There are two types of title insurance, the Owner’s Policy and the Lender’s Policy, also called the Loan Policy.  The Owner’s Policy is typically issued in the amount of the real estate purchase price.  It is purchased for a one- time fee at closing and lasts for as long as the owner or his or her heirs retain an interest in the property or has any liability by reason of the covenants of title.  The Owner’s Policy protects the purchaser against loss resulting from a defect in title.  Without title insurance these issues become the problem of the property purchaser and could cause significant financial loss.

The Owner’s Policy can be purchased in two forms -Standard and Enhanced Coverage. The Enhanced Coverage costs slightly more but covers additional risks not covered under the Standard Policy.  (See chart for details)

The Lender Policy is typically a required policy and assures the lender of the validity, priority and enforceability of its lien (mortgage).  The policy serves as protection for the lender’s security interest in the property.  The Lender’s Policy is issued in the amount of the loan.  If you are refinancing, you are obtaining a new loan and your lender will most likely require a new title search and new Loan Policy to protect their interest. You will not need to purchase a new Owner’s Policy.