Title Insurance FAQQ: What is title insurance? A: An insurance policy--protecting against loss should the condition of title to land be other than as insured. Q: Why do I need title insurance? A: When you buy a home, or any property for that matter, you expect to enjoy certain benefits from ownership. For example, you expect to be able to occupy and use the property as you wish, to be free from debts or obligations not created or agreed to by you, and to be able to freely sell or pledge your property as security for a loan. Title insurance is designed to cover these rights you bargain for. Q: What if I have a problem? Do I have to lose my property to make a claim? A: Not at all. At the mere hint of a claim adverse to your title, you should contact your title insurer or the agent who issued your policy. Title insurance includes coverage for legal expenses which may be necessary to investigate, litigate or settle an adverse claim. Q: What does this cost? A: The cost varies, depending mainly on the value of your property. The important thing to remember is that you only pay once, then the coverage continues in effect for so long as you have an interest in covered property. If you should die, the coverage automatically continues for the benefit of your heirs. If you sell your property, giving warranties of title to your buyer, your coverage continues. Likewise, if a buyer gives you a mortgage to finance a purchase of covered property from you, your coverage continues to protect your security interest in the property. Q: If my lender gets title insurance for its mortgage, why do I need a separate policy for myself? A: The lender's policy covers only the amount of its loan, which is usually not the full property value. In the event of an adverse claim, the lender would ordinarily not be concerned unless its loan became non-performing and the claim threatened the lender's ability to foreclose and recover its principal and interest. And, in the event of a claim there is no provision for payment of legal expenses for an uninsured party. When a loan policy is being issued, the small additional expense of an owner's policy is a bargain. Q: Can you be a little more specific about the types of claims, or risks, covered by title insurance? A: Sure. First understand there are basically three different levels of coverage: Standard coverage, extended coverage, and our most comprehensive "EAGLE Policy" coverage. Standard coverage handles such risks as:
An extended coverage policy may be requested to protect against such additional defects as:
Subject to availability in your locale, First American's EAGLE Policy covers all of the risks listed above, plus:
What happens right after escrow is opened? The results of this search are compiled into what is called, in most Western states, as a preliminary title report or "prelim". In some states, it's called a commitment of title; in others, it's called an encumbrance report. No matter what it is called, it reflects the conditions under which a title company is willing to issue a policy of title insurance. Still other states handle their title search results somewhat differently. Some title search firms will issue an abstract of title, "abstract" for short, which reflects the various documents in the chain of title without giving any determination as to the title's condition. How is a title search performed? Most title companies have their own "plant" department. This is where they keep duplicates of recorded documents, along with copies of certain recorded documents from offices and courts at the federal, state, county and municipal levels, any of which may affect titles. Thus, the examiner generally doesn't even have to leave the building to search through these documents. In the search, the title examiner has four primary determinations to make:
|