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What Is Title Insurance?

Title Insurance is perhaps the most unique form of insurance offered today. It is different from other types of insurance in that it protects you, the insured, from a loss that may occur from matters or faults from the past. Other types of insurance such as auto, life or health cover you against losses that may occur in the future. Title insurance does not protect against any future faults.

Another difference is that you pay a one-time premium. A title insurance policy will protect you from risks or undiscovered interests.

There are two principal forms of title insurance:

The lender's policy
The homeowner's policy

What is a lender's policy?
A Lender's policy protects the mortgage holder. If there is a fault in title that results in a loss, the mortgage holder will be paid back.

What is a homeowner's policy?
A homeowner's policy protects you, the purchaser, against a loss that may occur from fault in your ownership or interest you have in the property. You should protect the equity in your new home with a title policy. Literally, title insurance indemnifies the holder up to the face amount of the policy against any loss (not exempted in the policy) sustained by reason of defect in title. An Owner’s Policy insures the property owner against the loss of his or her security as a direct result of title defects. Most importantly, a title insurance policy guarantees that the property you are purchasing is free of undisclosed liens, confusion in rights of ownership and other clouds on the title. It guarantees that you own the property for which you bargained. The Policy protects its holder against title defects, liens and encumbrances existing on the date the policy is issued.

Title insurance protects against the following causes of loss:

Forgery
Fraud
Dower claims
Insanity and in competency
Undisclosed or Missing Heirs
Bankruptcies in other jurisdictions
After-born or adopted children
Suppressed or undiscovered will or codicils
Power of Attorney revoked by death or insanity
Claims arising by reason of foreign divorces, Invalid Divorces
Erroneous interpretations of statutes and rules of law
Misrepresentation of marital status
Unpaid taxes
Clerical errors in public records

In the event of a lawsuit questioning the terms of a title policy, the title insurance company provides legal defense for the policy holder and, if the suit is lost, pays all valid claims or losses up to the amount of the policy. All of this for a ONE-TIME PREMIUM.