All About Title Insurance

What is title?

Title is the bundle of rights, which creates ownership of a specific piece of real property. Title is what the seller sells and the buyer buys. Doesn't a deed prove ownership? No! A deed only transfers those rights of ownership, which the person signing the deed has to convey. A deed does not state the condition of the title, nor does a deed cancel any prior interests that others might have in the property.

What is title insurance?

A title insurance policy is the issued contract following a preliminary title search that protects the insured's bundle of rights, or interest in the property. A title insurance policy minimizes risk and protects the policyholder from matters of public record, except matters specifically reserved from coverage in the policy. Obtaining title insurance begins with a preliminary title search; this is a detailed inspection of public records to determine the condition of the title to a specific piece of real property. A title search will reflect any prior obligations, liens, judgments, title defects, or other issues affecting the land.

Title insurance also protects against certain losses a title search could not reveal, such as Fraud, Forgery, Mental incompetence of former owners, Mistakes in the recording of legal documents, Undisclosed missing heirs, Unpaid taxes, Invalid divorces or misrepresentations of marital status and Wills not probated.

Who needs title insurance?

Key Title issues policies most frequently to real estate owners, purchasers, and mortgage lenders; however, there are other types of special coverage available. There are two basic types of title insurance. A lender's policy and an owner's policy. The owner's policy protects the new buyer's investment up to the amount of the purchase price. The lender's policy protects the lender's security interest up to the face amount of the loan. A title insurance policy may also be issued to a purchaser in a land sales contract.

How much does title insurance cost and who pays for it?

For the owner's policy, the premium is a one-time fee based on the purchase price of the property. With the lender's policy, it is a one-time fee based on the amount of the loan. Ordinarily the seller will pay for the new owner's policy, while the buyer will pay the premium for their lender's policy.

The above information was provided by the Key Title Company.