In a sentence, Title Insurance assures that the "Home You Call Your Own", actually is.
Procuring Title Insurance for Buyers and Lenders is much more complex than it may sound. When a title Company sends out a Preliminary Title Policy to the Buyer for review, it is basically a statement that says, excluding any conditions known and stated, including encumbrances and various liens tied to the property, the property is insurable and upon close, the title company will issue the title policy.
During the title search and examination of the title history, there are potential title defects that are found on average in one in three properties that need to be cured. And they are cured as a matter of course. In the United states we have Land Records which established the property registration system. The curative or corrective actions done by the title companies helps to insure the integrity of that system.
Some of the enumerated risks that a title policy protects against are, defective deeds, boundary disputes, forgery, fraud, tax judgments, pending bankruptcy, utility and right of way easements, water and sewer assessments, even such things as child support liens, divorce, undisclosed or missing heirs and old mortgages.
There are two types of policies involved in a home purchase. One is the homeowners policy that protects the new Home Buyers. If there is going to be a loan on the property, the second type of policy comes into play. That would be the Lenders policy. The homeowners policy protects the new Buyer and for as long as they own the property. In some families, that can be many decades. You pay once and that's it. The Lenders policy protects the lender that their mortgage liens are valid.
When a homeowner sets out to do a refinance of the property, that protected lenders lien becomes invalid and a new policy has to be drawn because the lien amount and conditions may have changed.
Other types of insurance pays off after you have a loss. Title insurance is a bit different in that helps you and the lender, if there is one, to prevent a loss.
Many buying new homes ask why they need title insurance since the home is new and no one has lived their before. There are title risks created from the history of ownership as well as new liens that might have been caused by the Builder or Developer. These might include sub-contractor liens, tax liens, delinquent loans for purchasing the land or the new construction.
It becomes clear that all buyers and homeowners need this insurance. It will give you peace of mind and answer the question, "Is the Home You Call Your Own, Actually Yours?". Having a title policy assures that the answer to that question is, Yes.
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