Title insurance

File: Insurers set rates that can be charged immediately, as long as the new rate schedule is filed with the regulatory body.

Title insurance is a form of indemnity insurance predominantly found in the United States and Canada, which insures against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage loans. It is meant to protect an owner's or a lender's financial interest in real property 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 concept was developed to address the inadequacies of the traditional abstract of title and opinion of title methods, which were prone to errors and omissions.

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 could affect their ownership rights.
• Lender's Title Insurance: This policy protects the lender's interest in the property, ensuring that the mortgage is a valid first lien on the property.

Coverage

Title insurance policies typically cover:

• Defects in title that were not discovered during the title search.
• Liens or encumbrances on the property that were not disclosed.
• Errors in public records.
• Fraud or forgery affecting the title.
• Boundary disputes.

Title Search and Examination

Before issuing a title insurance policy, a title company conducts a title search to examine public records and identify any issues that could affect the title. This process involves reviewing:

• Deeds.
• Mortgages.
• Wills.
• Court judgments.
• Tax records.

Premiums and Costs

Title insurance is typically paid as a one-time premium at the time of closing. The cost of title insurance can vary based on the property's value and the state in which it is located. Some states regulate title insurance premiums, while others allow title companies to set their own rates.

Importance

Title insurance is crucial for both buyers and lenders as it provides peace of mind and financial protection against potential title issues. It ensures that the buyer has clear ownership of the property and that the lender's mortgage is secure.

Regulation

Title insurance is regulated at the state level in the United States. Each state has its own Department of Insurance or similar regulatory body that oversees title insurance companies and their practices. These regulations are designed to protect consumers and ensure the solvency and reliability of title insurers.

See also

• Real estate
• Mortgage loan
• Property law
• Deed
• Lien