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What is TITLE INSURANCE
Title insurance provides coverage for certain losses due to defects in the title that , for the most part , occurred prior to your ownership . Title insurance protects against defects such as prior fraud or forgery that might go undetected until after closing and possibly jeopardize your ownership and investment .
OVERVIEW
When a piece of real property is financed , purchased , or sold , a record of that transaction is generally filed in public archives . Likewise , other events that may affect the ownership of a property are also documented and filed . These may include liens , levies , encumbrances , etc . When a buyer purchases title insurance , the title company searches these records to find ( and remedy , if possible ) issues that may affect the purchaser ’ s ownership .
TITLE SEARCH AND EXAM
That ’ s where title insurance differs from traditional insurance models . When you purchase a policy insuring you for matters relating to your car or health , the insurance company assesses the risk of insuring you , and bases its premium on the risk being assumed . With title insurance , the insurer first works to identify the status of ownership , liens and other matters affecting title by collecting documents affecting title from the public records that are statutorily identified for the recording of real estate transactions . This process is called the search . Once the search is complete , the title agency can then determine the insurability of the title and list exceptions from coverage and requirements to insure .
UNDISCOVERED RISKS
Of course , even the most skilled title professionals may not find all title problems . Other risks include matters that are more difficult to identify , such as title issues resulting from filing errors , forgeries , undisclosed heirs , and other unforeseen problems . That ’ s one reason why your title insurance policy can play a key role in protecting your real estate investment .
OWNER ’ S POLICY
You will have the option of purchasing an Owner ’ s Policy of title insurance , which provides insurance directly to the insured owner listed in the policy and describes the type of real property interest owned . The insurance in both an Owner ’ s and Loan Policy is subject to the policy provisions , which include the covered risks , exclusions from coverage , the conditions and the exceptions to title listed on a schedule to the policy .
LOAN POLICY
When you purchase a new home or other piece of real property by securing a mortgage , you may be required by your lender to purchase a Loan Policy of title insurance . This policy insures the lender against covered title defects up to the amount of insurance . This coverage in favor of the lender lasts for the life of the loan under limited circumstances stated within the policy .
PREMIUM
If purchased , you will pay a one-time premium for each policy ( Owner ’ s Policy and Loan Policy ) at the close of your transaction , based on the total value of your home and the amount of your loan . This is another way in which title insurance differs from other insurance models , where premiums are paid on an ongoing basis . The purchase of a home or other real estate may be the largest financial investment you ever make . Title insurance can give you added peace of mind in knowing that the title to your investment is insured .