ABOUT TITLE INSURANCE
A TITLE INSURANCE POLICY
A title insurance policy is a guarantee by a title company that a thorough investigation of the title to the property has been conducted, and that you have been notified of any outstanding claims to the property.
The title insurance company reports any defects in the title in the form of a title commitment so that these matters can be corrected. It is important you know of all the claims on the property and have them resolved and declared away prior to you taking title to the property.
The title commitment will carefully detail what items of encumbrance are not covered by the policy. You can then either get these items resolved or bow out of the transaction.
TITLE INSURANCE
The tile insurance issued by the title company when they are certain the property is free from all liens, encumbrances, and interests, and the insurance guarantees this. This is done so the title can be legally transferred to the buyer to be used as security for the lender’ s funds. This is why the lender requires title insurance. Your lender has an interest in knowing you and the lender are the only parties with claims to the property.
The title insurance company thoroughly searches the public records to uncover any unpaid taxes, mortgages, judgments against previous owners, easements and other court actions or recorded documents which can affect title to the real estate.
Title insurance covers matters that occurred before the policy’ s effective date, but were discovered later. Your policy will detail what is covered, what is not covered and the effective date.
WHEN TITLE INSURANCE IS ISSUED
Title insurance generally protects you against certain claims or issues with the property that existed before your purchase, but coverage is limited to what the policy includes. Not every claim is covered, so it’ s important to review the policy carefully.
Unlike other forms of insurance, the original premium is
12 | THE BUYER’ S EDGE | A GUIDE TO PURCHASING A HOME