Title insurance

Insurance policy protecting against title defects

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Title insurance is a form of indemnity insurance predominantly found in the United States that protects against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage liens. The most common type of title insurance is the lender's title insurance, which is purchased by the borrower to protect the lender against loss due to title defects, liens, or other matters.

History

Title insurance originated in the United States in the 19th century. The first title insurance company, the Lawyers Title Insurance Corporation, was formed in 1876 in Philadelphia, Pennsylvania. The need for title insurance arose from the inadequacies of the traditional abstract of title and the attorney's opinion of title, which did not provide financial protection against errors in the title search or the public records.

Types of Title Insurance

There are two main types of title insurance:

• Owner's Title Insurance: This policy protects the property owner from title defects that were not discovered before the purchase of the property. It is usually issued for the amount of the real estate purchase price.

• Lender's Title Insurance: This policy protects the mortgage lender from title defects that could affect the lender's security interest in the property. It is usually issued for the amount of the loan.

Coverage

Title insurance provides coverage for a variety of title-related issues, including:

• Fraud and forgery
• Encumbrances or easements not recorded in the public records
• Defective title
• Liens from unpaid taxes or contractors
• Errors and omissions in deeds

Process

The process of obtaining title insurance typically involves a title search, which is an examination of public records to determine and confirm a property's legal ownership, and to identify any claims or liens on the property. Once the title search is complete, the title insurance company issues a title commitment, which outlines the conditions under which the title insurance policy will be issued.

Importance

Title insurance is important because it provides a safety net for both property owners and lenders. It ensures that the buyer is purchasing a property with a clear title and that the lender's interest is protected. Without title insurance, buyers and lenders could face significant financial losses due to title defects.

See also

• Real estate transaction
• Property law
• Mortgage insurance

External links

• American Land Title Association
• Consumer Financial Protection Bureau