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What is Title Insurance?
Title insurance is a contract to protect an owner against losses arising
through defects in the title to real estate owned. If the title is insurable,
the company guarantees the owner against loss due to any defect in title
or expenses in legal defense of the title pursuant to the terms of the
policy.
What is a Title?
A title is the evidence of rights which a person has to the ownership
and possession of land. A defect in that title can be any legal right
held by someone other than the owner to claim property or to make demands
on the owner of that property.
What is an Abstract?
An abstract is a history of the title to a particular tract of land. It
is not a title! It consists of a summary of the material parts of recorded
instruments affecting the title of the real estate. The abstract may be
correct but the title imperfect. The abstract is not a guarantee. It is
only a record of what has been recorded. It does not judge the correctness
of any item lists. It merely reports them for an examiner to interpret.
What is a Torrens Title?
In a very limited number of states, the Registered Land System is used.
Under this system, a court proceeding has been brought naming parties
who have an adverse interest in the property. If everything in the proceedings
is completed and handled properly, the Plaintiff is said to have a good
title. However, this is not a title guarantee by the state.
What can make a Title defective?
There are many possible causes of title defects that no examination can
disclose. That is because they have never been recorded and thus do not
appear in the abstract. A title insurance policy protects the owner against
all these hidden risks listed below:
Fraud. False claims of ownership, forged deeds, wills, signatures,
conveyances, instruments, false representations, false records of all
sorts, illegal acts of trustees, guardians, administrators, and attorneys.
Human Error. Errors in copying, indexing, recording; errors by
administrators, executors, trustees, guardians, and attorneys; destruction
of records.
Improper deeds and wills. Deeds by persons of unsound mind, minors;
deeds delivered after death or without the grantor's consent; invalid,
suppressed, erroneous wills, missing heirs, unsettled estates.
Liens and other rights. Liens for unpaid estate, inheritance,
income, property and gift taxes; homestead rights, community property
rights, irregular court proceedings, court opinion reversals, lack of
court jurisdiction; defective foreclosures.
What are Owner's and Lender's Policies?
A lender will often require a title policy for their protection alone.
Such a policy does not protect the owner. To protect themselves against
possible title defects, and owner should purchase an owner's title insurance
policy on the property.
Why buy title insurance?
When a person buys a car or consumer goods, they seldom need to know whether
the former owner is married, single, or divorced; whether they have paid
their taxes or are involved in a lawsuit. But when a person buys a new
home, it is necessary to have all that information and much more. For
a while he or she may own the property, others may also have rights in
the same real estate.
A competent investigation can uncover such items as unpaid taxes, easements,
restrictions and more. However, all items affecting the title are not
contained in a single book, in a single office or even in the same city.
Then, add to this, the possibility of human error at the multiplicity
of points. Yet what is not in the public records often causes title problems.
For all these reasons, and many more, a property owner needs the protection
afforded by title insurance.
What does title insurance cost?
The cost is directly related to the value of the property. The higher
its value, the more coverage is needed. The premium is small compared
to the total purchase price. The premium is paid only once and remains
in force for as long as the property is owned by the insured and continues
to protect the insured on warranties after it is sold.
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