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What is title insurance?

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Frequently Asked Questions

What is title insurance?
Title insurance protects you against loss on problems connected to the title to your property. It differs from other types of insurance. Most insurance guarantees a party against losses that will occur in the future, but title insurance generally insures against losses caused by problems with the title that happened in the past. Title insurance companies attempt to minimize this problem by searching public records to develop and document the chain of title and to detect known claims against or defects in the title to the subject property. If liens or encumbrances are found, the title insurer will require that steps be taken to eliminate them before issuing the title policy.

Is it necessary to purchase title insurance?
If you are borrowing money under a deed of trust, it is absolutely necessary because all lenders require the protection for an amount equal to the loan. This protection lasts until the loan is repaid and it protects the lender, but it does not protect you or your equity in the property.

Does title insurance do anything for me?
A lender’s policy does not, but an owner’s title policy is available insuring up to the full value of the home. It is important that you understand that you have no real protection unless you purchase this owner’s policy. An owner’s policy is available at the same time as the lender’s policy for a discounted rate. The additional cost above the cost of the lender’s policy is relatively small and does protect your equity in the property.

But doesn’t the lender’s policy indirectly protect me?
No. This policy protects only against the lender’s loss.

When does title insurance protection begin and end?
Title insurance normally protects against losses arising from events that occurred prior to the time you obtained the policy. It ends on the day the policy is issued and extends backward in time for an indefinite period. This is in marked contrast to other types of insurance which protect against losses occurring after the policy is issued.

For how long is the property covered by the title insurance?
Indefinitely. The owner’s protection lasts as long as the owner or any heirs have an interest in or any obligation with regard to the property. When it is sold, however, the lender will require a new policy.

How often do I pay the premium on title insurance?
Only once. The payment that you make when you purchase the property or make your loan is the only payment that will be required unless you get a new loan.

If I pay off my loan but keep the property and get a new loan, will I need another policy?
You will not need a new owner’s policy, but the new lender will require you to purchase a new lender’s policy. Even if you refinance with the same lender, the existing lender’s policy terminates when you pay off the deed of trust.

What are some things that can cause problems to my title?
Some examples of items that can cause problems to your title are deeds or wills which contain improper information; outstanding judgments or tax liens against the property; easements; mistakes in the public record; previously undisclosed heirs claiming to own the property; forged signatures on deeds; reserved mineral rights; and claims of adverse possession.

Do you recommend that I purchase an owner’s policy?
Definitely. You should not run the risk of title problems on what will be one of the largest investments you will make—your home.