What is title insurance?
Title insurance insures against financial loss caused by defects in title to real estate. Title insurance companies defend against lawsuits attacking the title, or in the case of a covered loss, reimburse the insured up to the policy limit.
What kinds of defects does title insurance protect you from?
It protects you against loss due to title defects, liens, or other similar matters. Title insurance protects you from claims of ownership by other parties and against losses from problems that arose before you bought the property. Additionally, the title company will defend you in court if there is a claim against your property, and will pay for covered losses.
How long does it last?
A loan policy lasts until the loan is paid off. An owner's policy lasts as long as you or your heirs own the land. It also may provide warrantor's coverage after you no longer own the property, depending on your policy provisions. Policy language has changed over time, so it is recommended you read the continuation of coverage provisions in your policy carefully to determine coverage terms.
Do you have to renew your policy?
You pay for title insurance only once, when you buy the policy, unless you decide later to add more coverage. Keep your policy, even if you transfer your title or sell the property. Coverage lasts as long as you or your heirs own the land, and may last forever for any title warranties made when you sell the property.
What happens if I transfer my title to my business, my trust, my LLC,
or my children?
Depending on the type of policy you have, it may not provide coverage when you transfer your title into your business or to someone else that is not considered an insured. To determine what type of coverage you have, read your policy, check with your title agent, or speak with an attorney.
Is it like homeowners insurance?
No, title insurance is different from other types of insurance. It does not insure against fire, flood, theft, or any other type of property damage or loss. It protects against losses from ownership problems that arose before you bought the property, but were not known at the time you bought the property. It does not guarantee you will be able to sell your property, or borrow money on it.
What's the difference between a title commitment and a title policy?
The title commitment comes before closing; the title policy is issued after closing. The commitment says a title company is willing to issue title insurance under certain conditions and if the seller fixes certain problems. The policy provides coverage for the property.
What types of policies are there?
There are two types of policies: owner’s policies and loan policies.
Owner's Policy
The owner’s policy protects you against losses from ownership problems that arose before you bought the property, but were not known at the time you bought the property. For example, you could lose title to your property due to fraud, errors or omissions in previous deeds, or forgery of a previous deed. The owner's policy protects the buyer from the covered risks listed in the policy.
There are separate types of policies for commercial and residential property. The T-1 is commonly used for commercial property and undeveloped land. The T-1R is for most residential property.
Loan Policy
The loan policy is issued to the mortgage lender. It protects the lender’s interest in the property until the borrower pays off the mortgage.