About Title Insurance

Purchasing real estate and making loans secured by real estate comes with risk. Much of that risk has to do with the title to the real estate. The title may contain defects, liens, encumbrances or other matters that can jeopardize the purchaser’s and/or lender’s interest in the property. Title insurance is a contract of indemnity that protects real estate purchasers and lenders against loss due to specific covered risks related to the title to the real estate. Instead of the buyer or lender assuming 100% of those risks, a title insurance policy shifts much of that risk to a title insurer for a one-time premium.

There are two types of policies available in a typical real estate purchase transaction – a loan policy and an owner’s policy. The loan policy, when issued protects the lender only as to the validity, enforceability and priority of its lien against title defects. Unless an owner’s policy is issued, the title insurer will respond only to the insured lender if there is a title claim. The purchaser must obtain an owner’s policy in order to be afforded any protection of their own from title risks. Covered risks in an owner’s title insurance policy include:

  • Title being vested in someone other than the insured
  • Defects, liens or encumbrances on the title including defects caused by forgery; fraud, undue influence, duress, incompetency, incapacity or impersonation
  • The lien of real estate taxes or assessments by a governmental authority due and payable, but unpaid
  • Unmarketable title
  • No right of access to and from the Land
  • The violation or enforcement of any law, ordinance, permit or governmental regulation restricting, regulating, prohibiting or relating to the occupancy, use or enjoyment of the Land if a notice is recorded in the Public Records
  • The exercise of the rights of eminent domain if a notice is recorded in the Public Records
  • A prior fraudulent or preferential transfer under federal bankruptcy, state insolvency or similar creditors’ rights laws

In the event of actual monetary loss or damage sustained by the insured due to a covered risk, the title insurance company will defend the insured’s interest or reimburse the insured for its loss subject to exclusions and exceptions in the policy.