What is Title Insurance?
Title Insurance is an insurance against undisclosed issues affecting title to a property and protects against financial loss due to title defects, liens or other matters of public record. It provides coverage for future claims or future losses due to title defects created by past events.
Prior to a policy being issued, an abstract company conducts a title search to detect, prevent, and eliminate risks and losses caused by title problems. A search of public records is done to establish the chain of title to the property and identify any potential claims. The title search may reveal issues affecting the chain of title such as easements, restrictions, court actions, unpaid taxes, unsatisfied mortgages, judgments and tax liens against the current or past owners. These issues would then be reported to you prior to the purchase of the property. Once reported, these matters can be effectively dealt with prior to closing.
Title insurance also protects against any recorded defects, liens or encumbrances upon the title that are unreported to you but are within the coverage of the policy issued. Risks not discoverable by a search and examination of public records such as forgery, incompetence or incapacity of the parties, fraudulent impersonation, and unknown errors in the records are examples which could provide a basis for a claim after you have purchased the property.
Unlike other types of insurance, title insurance features a one-time premium that provides you with an owner's title insurance policy that will remain in effect during your ownership of the property. There are no annual payments to keep this policy in force.