Title Insurance is an insurance policy that protects property owners and their lenders against losses related to the property’s title or ownership. Title insurance minimizes the risk of acquiring property whose legal history is unknown to the purchaser. This insurance is issued for a one-time fee, called a premium, usually due at the time of closing or settling a real estate transaction, and is based on the price of the property. Title insurance coverage lasts as long as the insured or their heirs hold title to the property.
There are two types of title insurance:
- An Owner’s Title Insurance Policy guarantees that the buyer has the right to the property. It usually covers the cost of any legal fees that may arise when defending a claim.
- A Lender’s Title Insurance Policy protects a bank or other lending institution issuing a mortgage from any losses resulting from disputes over property ownership. This policy covers the amount of the loan and the premium is calculated based on that amount. Most lenders require this coverage. Unlike an owner’s policy, this coverage ends when the mortgage is paid.
When a piece of real property is financed, purchased or sold, a record of that transaction is generally filed in public archives. Likewise, other events that may affect the ownership of a property are also documented and filed. These may include liens, levies, encumbrances, etc. When a buyer purchases title insurance, the title company searches these records to find (and remedy, if possible) issues that may affect the purchaser’s ownership.
That’s where title insurance differs from traditional insurance models. When you purchase a policy insuring you for matters relating to your car or health, the insurance company assesses the risk of insuring you, and bases its premium on the risk being assumed. With title insurance, the insurer first works to identify the status of ownership, liens and other matters affecting title by collecting documents affecting title from the public records that are statutorily identified for the recording of real estate transactions. This process is called the search. Once the search is complete, the title insurance underwriter can then determine the insurability of the title and list exceptions from coverage and requirements to insure.
Even the most skilled title professionals may not find all title problems, which is why you want to choose the best insurers out there. Longmont Title and First American Title™ makes sure to check the history of the property for other risks as well, including matters that are more difficult to identify, such as title issues resulting from filing errors, forgeries, undisclosed heirs, and other unforeseen problems. This is one reason why your title insurance policy can play a key role in protecting your real estate investment.
First American Title™ has been dedicated to providing personal, friendly, and diligent work on Title Ownership for over 130 years, growing from a small California based business to a nationwide trusted insurer of titles. As real estate is the nation’s largest market, its purchase and sale is essential to the health of the U.S. economy and its citizens. These transactions, however, are never without risk. That’s why title insurance has been protecting American homeowners as long as First American Title™. When you work with Longmont Title, you get the experience, dedication, and trust of community members researching your title and protecting you from its past.