Title insurance is an insurance policy that protects the insured against loss should the condition of the title to the property be other than as insured. Although each policy is different, generally speaking, title policies offer protection against property loss or damage that result from liens, encumbrances, or other defects in the title to the property.
Title insurance is offered to both property owners (buyers) and lenders.Title insurance for property owners is referred to an “Owner’s Policy” whereas the lenders receive a “Loan Policy.” The Owner’s Policy is purchased for a one-time fee at closing and is typically issued in the amount of the sales price. The Loan Policy is required by most lenders when they extend a mortgage loan and is typically based on the loan amount.
What Is A Title Search?
The title company performs a “title search” by searching the land records in the county or city where the property is located. The title company will examine the records to first determine the name(s) of the property owner(s).The title search also exposes any mortgages, liens, unpaid taxes, or judgments that affect the property. Finally, the title search reveals restrictions, covenants, easements and any leases affecting the property.
The title commitment is issued by the title company as a commitment or promise to issue a title policy to the buyer or lender after the closing provided that the requirements of the commitment are met. The commitment is issued prior to closing whereas the formal title policy is issued after closing.The commitment sets forth information pertaining to the property owner(s), the legal description, and matters revealed by the public record that affects the property. The commitment will also show a Requirements section setting forth items that must be addressed or documents that must be provided prior to issuing the final title policy.
Types of Coverage
There are different title policies available to purchasers and lenders.The items covered in the policies and the costs for the policies vary depending on the specifics of the property and certain elections of the insured.Generally speaking, the title industry offers two types of policies: a “standard” and an “eagle.” The eagle policy will offer some additional coverage for an increased cost of approximately 20%, as compared with the standard policy. Questions pertaining to coverage and costs should be discussed on an individual basis with the title company.