Title Insurance

Title insurance is an insurance policy that protects the insured against possible loss if the condition of the title to real estate (i.e. land) is different than the condition of the title as insured.

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A lenders title insurance policy covers the amount of the loan. The amount of the coverage decreases as the amount of the loan decreases (i.e. as the principal balance of the loan is gradually paid down). The amount of the loan is generally less than the fair market value of the real estate. All lenders will require the buyer of real estate to purchase a lender’s title insurance policy to protect the lender’s security interest in the property.

An owner’s title insurance policy covers the purchase price (generally the fair market value) of the real estate. The buyer has the right to choose to purchase an owner’s policy. The cost of an owner’s title policy is minimal when the owner’s title insurance policy is issued at the same time as the lender’s title insurance policy (i.e. at the real estate closing). A buyer of real estate should always purchase an owner’s title insurance policy at the time of closing.

There are different types of title insurance. Therefore, the exact coverage will be dictated by the title policy that you purchase. Most basic title insurance policies, at a minimum will cover the following risks: loss when a deed was not properly recorded; loss when a deed is not joined in by a necessary party (i.e. a co-owner, co-tenant, heir, spouse, corporate officer, business partner, etc.); loss because of forgery and/or impersonation; loss because of a lack of capacity, competency, or legal authority of a party; loss because of a lack of right of access to the real estate; loss because of an undisclosed (recorded) prior mortgage or lien; and loss because of undisclosed (recorded) easement or use restriction relating to the real estate. Other policies with the following extended coverage are often available: loss because the deed to land with improvements (i.e. buildings) encroaches on land of an abutting land owner; loss because of an incorrect survey; loss because of “off record” matters (i.e. adverse possession claims or prescriptive easements); loss due to pre-existing violations of subdivision laws, zoning ordinances or other regulations; loss due to “silent” or “off record” liens (i.e. mechanics’ or estate tax liens); and other possible coverage.

There are numerous endorsements that are available in addition to the coverage that is provided by a standard title insurance policy. The following list is just a small sampling of available title policy endorsements: extended coverage as discussed in the question directly above; creditor’s rights endorsements; survey matters; covenants; easements; surface damage; access; taxes; priority; liability; acts and knowledge; governmental regulation; future insurance and many others.