A policy of title insurance is the contract issued by a title insurance company that protects you and your lender against property loss or damage caused because of property title problems.
What is covered by the title insurance?
The policy agrees to reimburse you or hold you harmless when a monetary loss is caused by certain encumbrances on title or defects. Examples are:
- another person claiming an ownership interest int he property
- improperly recorded documents
- fraud
- forgery
- liens that you were not aware of at time of purchse
- encorachments
- easements
A title insurance policy does not cover the physical conditions on the property.
How is title insurance different from other insurance types?
Unlike home, auto and health insurance which protect against future events, title insurance protects you against events that occurred in the past. Title insurance premiums are a one time expense paid at the close of escrow rather than on a continuous basis.
What types of title coverage are available?
There are two basic types of policies. the owner’s policy and the lender’s policy.
The owner’s policy protects the buyer against any losses from items covered in the policy. The lender’s policy protects that lender.
Who pays for the title insurance?
Sellers typically pay for the owner’s policy for transactions in California. The buyer pays for the lender policy.
How long is title insurance good for?
Your title insurance policy provides coverage for as long as you own the property. Coverage is limited to the dollar amount of the policy, which is adjusted for annual inflation.
Your home is probably the biggest investment you will ever make.
Lenders will always require title insurance for both purchase and refinance transactions. Title insurance is highly recommended even on cash purchases.
If you have any questions on this topic or any other mortgage-related topic, by all means reach out to me.
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