Title Insurance

Why Title Insurance?

For most Americans, buying a home is the single largest financial investment they will ever make. And while property ownership may seem very straightforward, a homebuyer’s rights to enjoy their property aren’t always as clear.  There are dozens of ways in which the title to – and ownership of – a property can be jeopardized.  The title insurance process helps reduce the likelihood that title issues will arise, and the policies subsequently issued help protect against loss when a buyer’s ownership rights are challenged.

Title Search and Exam

While the function of most other forms of insurance is risk assumption through the pooling of risks for losses arising out of unforeseen future events (such as sickness or accidents), the primary purpose of title insurance is to eliminate risks and prevent losses caused by defects in title arising out of events that have happened in the past. This is where the title search and exam – the first steps in the title insurance process – are critical.

Skilled title professionals search and examine various public records to find and isolate title risks. This is intricate and tedious work, as information can be missing or filed inconsistently.  These professionals examine documents such as judgments, liens, general taxes, utility assessments, as well as many others. In certain transactions, real property characteristics may also be evaluated, which include zoning, location, surveys, improvement type, and more. Additionally, these searches serve to identify any potential title risks, such as unreleased mortgages, mechanics’ liens, tax judgments, outstanding child support liens, pending bankruptcy or divorce proceedings, probate issues, etc.

Curative Action

One out of three searches turns up title issues that can affect a buyer’s property ownership rights. Once identified, title professionals may take measures to remedy these problems, or otherwise insure against (or around) the identified risk.  Many property buyers receive their policy of title insurance without ever knowing that this important work was completed behind the scenes to protect their interests.

Policy of Insurance

Once the search and curative work is completed and a property’s title is determined to be in insurable condition, the transaction can close and a policy of title insurance can be issued. In addition to insuring against loss arising from record matters, other than those excepted or excluded from coverage, if any, the policy also insures against loss arising from certain title risks that are undiscoverable from public records, such as forgery, fraud, and lack of capacity in prior transactions.