Title insurance is an insurance policy that covers the insured party against losses, up to the policy amount, resulting from disputes over the rightful ownership of a piece of real estate property. No title company can guarantee that a purchaser of real estate property is the owner of the property. The title company reviews all recorded documents related to the property and makes a judgment related to the ownership of the property. If they feel comfortable that you should be the owner of the property, the title company will issue a policy covering you against loss if for any reason you are not the proper owner of the property.
Title insurance provides protection by covering issues that could arise with the property’s title and background paperwork. Title insurance protects the property and the lender from issues, including:
- Liens and encumbrances
- Fraud or errors in recording legal documents
- Estate planning defects by previous property owners, including unacknowledged heirs or improper probating of a will
What are the Benefits to Title Insurance?
For lenders, a mortgagee title insurance policy protects the lender from a loss incurred, up to the loan amount, in financing a piece of real estate resulting from an invalid or inferior lien position. A mortgagee title insurance policy allows the lender to originate real estate loans without having to have a real estate attorney review each loan. For the homeowner, an owner’s title insurance policy protects the owner from a loss, up to the policy limit, resulting from a future claim against their ownership of the property.
What’s the difference between Title Insurance (Mortgagee Title) and Owner’s Title Insurance?
Mortgagee Title Insurance is taken in the loan amount and protects the lender. It is important to note the policy is only good on a specific loan. If you refinance, pay off or obtain a new loan, a new policy is required. An Owner’s Title Insurance policy is purchased at the time a property is purchased and protects you, the buyer. This insurance policy remains in effect until you sell the property.