What is Title Insurance?
The title insurance industry has been protecting the American dream of homeownership for more than 125 years.
Real property is the nation’s largest asset. The behind-the-scenes work of title companies ensures the quick and
secure transfer of land, fostering lender and consumer confidence in their real estate investments.
The objective of title insurance remains the same as it has always been – helping the parties in real estate
transactions to determine their rights and interests, and assuring that land transfer is expeditious and secure.
Protecting the parties involved in real estate transactions is the reason the title insurance product was developed.
In this country, matters affecting ownership and other real estate interests are entered in public records. Before a
transaction is completed, a title search of the public records is made in an effort to locate potential problems so that they
can be rectified and the transfer can proceed.
While most problems can be located in a title search by skilled professionals, there can be hidden hazards that even
the most thorough search will not reveal. Examples include forgeries in the chain of title, a claim by a previously
undisclosed relative of a former owner, or a mistake in the records. Liens, easements, rights-of-way, life estates,
air and subsurface rights, and future interests are also found in a title search.
Title insurance is substantially different than other types of insurance coverage, which can often lead to a
misunderstanding of the product. Title insurance emphasizes risk prevention rather than risk assumption. This emphasis
on risk prevention is a labor intensive and costly component of doing business, but the coverage offers the best
possible opportunity for avoiding claims and losses in real estate transactions.
The Title Search
After your sales contract has been accepted, a title professional will search the public records to look for any
defects with the home's title. This search typically involves a review of land records going back many years. More
than 1/3 of all title searches reveal a title problem that title professionals fix before you go to closing. For instance,
a previous owner may have had minor construction done on the property, but never fully paid the contractor. Or the previous
owner may have failed to pay local or state taxes .Title professionals seek to resolve problems like these before you go to
Types of Title Insurance Policies
There are two basic types of title insurance policies. A lender’s policy, usually based on the dollar amount of the loan, protects only the
lender's interests in the property should a problem with the title arise. Similarly, an owner's policy, usually based on the home’s total
purchase price, protects only the homebuyer’s interests in the property should a problem with the title arise. An owner’s policy will provide
protection against ownership challenges, errors or omissions in deeds, mistakes in examining records, missed liens, forgery and undisclosed
heirs, among other things.
Sometimes clouds on title result from matters that could not be found in the public records or are not fully considered in the title search process. To
help protect you in these events, it is recommended that you obtain an Owner's Policy of Title Insurance to insure you against the most unforeseen
Owner's Title Insurance, called an Owner's Policy, is usually issued in the amount of the real estate purchase. It is purchased for a one-time
fee at closing and lasts for as long as you or your heirs have an interest in the property. Only an Owner's Policy fully protects the buyer should a
covered title problem arise with the title that was not listed as an exception during the title search. Possible hidden title problems can include:
Errors or omissions in deeds
Mistakes in examining records
An Owner's Policy provides peace of mind and an assurance that your title company will stand behind you — monetarily and with legal defense if needed — if a covered title problem arises after you buy your home.
The bottom line is that your title company will be there to help pay valid claims and cover the costs
of defending an attack on your title. Receiving an Owner's Policy isn't always an automatic part of the closing process, and is paid for by different
people in different parts of the country. Be sure you request an Owner's Policy and ask how it is paid for where you live. No matter who pays for the
Owner's Policy, the fee is a one-time fee paid at closing. The Owner's Policy protects you for as long as you or your heirs have an interest in the
You also have the option of purchasing a policy with expanded coverage. It's called the Homeowner's Policy and it covers more things than the
There are two types of title insurance: Owner's title insurance, as mentioned above, and Lenders title insurance, also called a Loan Policy. Most
lenders usually require a Loan Policy when they issue you a loan. The Loan Policy is usually based on the dollar amount of your loan. It only protects
the lender's interests in the property should a problem with the title arise. It does not protect the buyer. The policy amount decreases each year and
eventually disappears as the loan is paid off.
(Source: alta.org; Effective 4.14.14)
Old Republic is providing this information as a free customer service and makes no warranties or representations as to its accuracy.
Old Republic strongly recommends that consumers investigate title insurance, title insurers and/or obtain guidance and advice from qualified
professionals in this field, including attorneys specializing in Real Property & Title Insurance as to any particular situations affecting them.