Title insurance is insurance against loss from defects in title to real property
and from the invalidity or unenforceability of mortgage liens. It will cover you
if a problem regarding title defects or legal ownership arises that was not discovered
during the title search. Title insurance, and the search and examination process
that takes place before a policy is issued, assures the homebuyer that the title
to their property is clear, and that they are protected from any future challenges
to their title. It protects the buyer’s home investment and assures the buyer that
the property is really his or hers.
There are two types of title insurance:
- Owners Policy
An owner’s policy insures the purchaser that the title to the property is free from
defects, except those which are listed as exceptions in the policy. It is normally
issued in the amount equal to the real estate purchase price and remains in effect
for as long as the owner or their heirs retains an interest in the property.
- Loan/Mortgage/Lender Policy
The lender’s policy is separate from the owner’s policy. It assures the validity
and enforceability of the lien of the lender’s mortgage or deed of trust and serves
as protection for the lender’s security interest in the property. A Loan Policy
is issued to the lender in the amount of the loan, and liability decreases as the
mortgage debt is reduced.
The difference between a Loan Policy and an Owner’s Policy is the length that each
policy stays in effect. A Loan Policy expires when the loan is paid in full and
an owner’s policy protects the owner’s in the property for as long as they or their
heirs have an interest in the property.