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Title Insurance Information

What Is It?

Title insurance is an exclusively American invention. First offered in the late 1800s, Title Insurance is a contract between the insured and the title company. Under the terms of the contract the insured agrees to pay a premium and the title company agrees to defend the title or pay losses the Insured may suffer if the title is challenged or defective. Unlike most types of insurance which protect against events in the future, Title Insurance insures against events that happened in the past.

Why Buy It?

There are many hidden defects that can cause the complete or partial loss of your home or business property. Here are a few of the most common hidden risks that can cause loss of title or create an encumbrance on title:

  • Forgeries

  • Frauds

  • False Representations

  • Lost or Misinterpreted Wills

  • Deeds by Minors

  • Mistakes in Descriptions

  • Undisclosed/Missing Heirs

  • Clerical Errors

  • Illegal Trusts

  • Liens for Unpaid Taxes

What Does It Include?

The premium you pay for Title Insurance is designed to finance two very separate items. The first item it pays for is the time and expense associated with the title examiner reviewing the applicable documents and records. This includes an extensive search of the public records to determine whether there are any adverse claims or other problems with the title. The second item it covers is the risks that the title is not what it appears to be, for whatever reason (note the "Why Buy Title Insurance" paragraph above for some examples). If a covered loss occurs, the insurance company pays you for your loss up to the policy limits as well as covering the legal fees associated with defending your title against the claims of others.

What Is Not Included?

There are two high-risk areas that Title Insurance does not normally cover. The first of these are surveys. As a general rule, Title Insurance does not insure that you are buying the piece of property you think you are buying. It insures that you are buying the legal description. You must get a staked survey, certified to you, to show where the legal description of the property is actually located. The second area that is normally not covered is Mechanics Liens. Many sellers make various improvements to their properties to make them more attractive to purchasers. Unfortunately, this can lead to contractors who may have a lien that is superior to your rights as a purchaser.

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