What is Title Insurance?

Title Insurance

Title insurance protects real estate owners and lenders against any property loss or damage they might experience because of liens, encumbrances or defects in the title to the property. Each title insurance policy is subject to specific terms, conditions and exclusions.

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What is a title?

Simply stated, the title to a piece of property is the evidence that the owner is in lawful possession of that property.

How does title insurance differ from other insurance?

Insurance such as car, life, health, etc., protects against potential future events and is paid for with monthly or annual premiums. A title insurance policy insures against events that occurred in the past of the real estate property and the people who owned it, for a one-time premium paid at the close of the escrow.

What does it cover?

Title insurance protects against claims from defects. Defects are things such as another person claiming an ownership interest, improperly recorded documents, fraud, forgery, liens, encroachments, easements and other items that are specified in the insurance policy.

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Who needs it?

Buyers and lenders need title insurance in order to be insured against various possible title defects. The buyer, seller and lender all benefit from issuance of a title insurance policy.

Because title insurance protects both home buyers and lenders, there are two types to suit the end user’s needs:

There are two types of owner’s title insurance policies certified by the American Land Title Association® (ALTA®):

Who pays for title insurance?

State laws and customs vary on who pays for title insurance, but here’s who generally pays for title insurance:

For more information on laws and customs in your specific state, download our State Laws & Customs Toolkit.

How is a title insurance policy created?

After the escrow officer or lender opens the title order, the title agent or attorney begins a title search. A Preliminary Report is issued to the customer for review and approval. All closing documents are recorded upon escrow’s instruction. When recording has been confirmed, demands are paid, funds are disbursed, and the actual title insurance policy is created.

What is escrow?

Escrow refers to the process in which the funds of a transaction (such as the sale of a house) are held by a third party, often the title company or an attorney in the case of real estate, pending the fulfillment of the transaction.

What are the title insurance policy types?

The Owner’s Policy insures the new owner/home buyer, and a lender’s policy insures the priority of the lender’s security interest.

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For more information about title insurance or title policy coverages.

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