Title Insurance

Title insurance is an indemnity insurance that protects the insurance holder against losses that he/she may have to incur as a result of defects in title to real property. It safeguards an insurance holder from title defects, mortgage liens and other such issues.

The terms of the title insurance policy define the risks that are covered under the insurance scheme. The policy covers the title defects that arise prior to the ownership and it is effective from its issue date. Before the concept of title insurance was conceived, buyers had to bear the responsibility of the validity of the land title and could lose their investment if the title was found to be invalid or fraudulent. With the creation of title insurance schemes, the purchase of land or the investment in real estate has become less risky.

You might be wondering whether you should purchase title insurance. You might have questions regarding what it covers and why you should buy it. Without waiting any further, you must take a look at the importance of purchasing title insurance.

Why is Title Insurance Important

Title insurance protects the insurance holder and his/her lender in case of defects in the property title. A title insurance policy provides for the losses that result from defects in the title to the real estate property. It also covers the legal expenses required for defense in case of a claim against the real estate title.

Title insurance policies for owners are different from those for lenders. A standardized owner's policy secures the purchaser from the defects in the title to the property. It also covers the losses to be borne in case the real estate property is unfit for sale as also the losses suffered if the purchased land has no access rights. The price for which the property was bought is the liability limit of the policy and the premium is paid by the seller or the buyer. Lender's policy, which is also known as a loan policy, is meant to be used by mortgage lenders. It not only covers the lender's loss but indirectly benefits the purchaser of the loan by covering his/her mortgaged possessions. Lender's policies also help the sale of mortgages in the secondary market.

It is important to understand that a title insurance policy protects the insured for an indefinite period of time! And I am not exaggerating. The insurance cover exists as long the property owner or his/her successors have an interest in the property. Whenever the property is sold to another party, a title insurance policy needs to be purchased by the new owner. Does the title insurance coverage increase in proportion to the increasing rates of real estate? Ideally it should, but sadly it does not. However, in case of a remarkable rise in the price of a property, the property holder/owner can purchase an additional coverage on the same policy. In this case, he/she is required to pay an additional fee, the coverage still applies to the title defects that existed before the original date of the policy.

Title insurance policies are available in countries like Canada, UK, Mexico, Australia, China and Europe. Before purchasing a title insurance policy, it is necessary to ensure that the insurance company completes an extensive research on all the relevant documents and records pertaining to the property. Through this research, the title insurance companies identify the problems associated with the title and also ensure that the liabilities on the property (if any) are paid off.

Purchasing a title insurance policy provides the policyholder not only with financial security but also with peace of mind.