Title insurance helps to protect lenders and homeowners against major losses related to specific real estate. Lehman Title & Escrow, LLC wants to make it easy for you to understand the various aspects of coverage involved in most transactions. While title insurance can be a very confusing and complex subject for consumers, an understanding of the basic reasons and terminology will make the process less confusing.
Title policies insure owners and lenders against possible losses from claims against real property ownership. The preliminary title report or commitment provides advance information on matters which must be addressed prior to or at closing as well as items that will be excepted from coverage, such as mortgages, judgments, or other liens. Lenders and owners are thereby given an opportunity to correct title flaws and become aware of restrictions and exceptions before closing.
Title commitments are a roadmap for what a title agent needs to do to insure each transaction, and ultimately title policies are written and issued based upon a title search and examination of public records, sometimes including court records. Buyers should be aware that just because someone has a deed to a property, that does not prove that they are the true owner of the property or the only owner of a property, with the right to sell it. Only title insurance can protect your interest in the property from unknown encumbrances, legal conflicts and unforeseen claims.
A policy of title insurance is similar to other types of insurance that protect you from an injury. Your insurer will provide legal defense against challenges to your insured title (dependent, of course, upon the type of policy coverage ) and will reimburse you financially for losses due to the covered defects in your ownership rights, depending upon actual insurance coverage and the terms and conditions contained in your policy.
It is important to remember that a lender's title policy does not insure a borrower against title risks. For a Buyer/Owner to be protected, they must purchase an Owner’s Title Policy. Unlike auto and homeowner's insurance, an Owner’s Title policy only has to be purchased once for the new owner of each property, not annually.
Some ways for the title to your property to become defective, are:
- A deed or mortgage in the chain of title may be a forgery.
- A deed or a mortgage may have been signed by a person under age.
- A deed or a mortgage may have been made by an insane person or one otherwise incompetent.
- A deed or a mortgage may have been made under a power of attorney after its termination and would, therefore, be void.
- A deed or a mortgage may have been made by a person other than the owner, but with the same name as the owner.
- The testator of a will might have had a child born after the execution of the will, a fact that would entitle the child to claim his or her share of the property.
- A deed or mortgage may have been procured by fraud or duress.
- Title transferred by an heir may be subject to a federal estate tax lien.
- An heir or other person presumed dead may appear and recover the property or an interest therein.
- A judgment or levy upon which the title is dependent may be void or voidable on account of some defect in the proceeding.
- A deed or mortgage may be voidable because it was signed while the grantor was in bankruptcy.
- There may be a defect in the recording of a document upon which your title is dependent.
The ways an Owners Title policy can protect you from those issues is:
- Title insurance covers attorneys’ fees and court costs.
- Title insurance helps speed negotiations when you’re ready to sell or obtain a loan.
- By insuring the title, you can eliminate delays and technicalities when passing your title on to someone else.
- Title insurance reimburses you for the amount of your covered losses, subject to policy coverages and limitations.
- Each title insurance policy is paid up, in full, by the first premium for as long as you or your heirs own the property.
- Claims constantly arise due to marital status and validity of divorces. Only title insurance protects against claims made by non-existent or divorced "wives" or "husbands."
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