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What is Title Insurance?
A title
insurance policy protects a real estate owner or lender against any damage they
might experience because of liens, encumbrances, or defects in the title to
said property, or the incorrectness of the related search.
How Does Title Insurance Differ from
Casualty Insurance?
Casualty Insurers (car, life, health, etc.) assume
risk for future events, collecting monthly or annual premiums. A title
policy insures the past of the real property and the people who owned
it, for a one-time premium paid at the close of escrow.
What Does Title Insurance Cover?
Title insurance protects against claims from various defects such as
another person claiming an ownership interest, items improperly recorded,
fraud, forgery, liens, encroachments, easements and other items that are
specified in the actual policy.
Who Needs It?
Purchasers and lenders
need title insurance to know the property they are involved with is insured
against various possible title defects. Whether it's a sale, refinance or
construction loan, the seller, buyer and lender all benefit.
How is a Title Policy Created?
After
the escrow officer or lender opens the title order, the title company
begins a search of the public records including the County Recorder,
Federal and State Agencies, and County and City Offices. A Preliminary Report
is issued to the customer for review and approval. All closing documents are
recorded upon escrow's instruction. When Recording has been confirmed, demands
are paid, funds are disbursed, and the actual title policy is typed and sent to
the insured.
What Types of Policies are Available?
A standard CLTA 'Owners' policy insures the new owner (the home buyer) and
an ALTA or CLTA 'Lenders' policy insures the priority of the lender's security
interest. An extended coverage ALTA-R (residential) policy to owners of 1-4
unit property is also offered. The ALTA Homeowner's Policy is for owners of 1-4
unit properties as well and expands the number of covered title risks to 29,
including certain specified risks that may arise in the future.
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