It should be remembered that
title is synonymous with the words “right”,
“interests,” “estate.” Such words are used to
denote the degree, quantity, nature and extent to
which a person may have an interest in real
estate.
An insurance policy that is
written on title to real estate differs from every
other form of insurance in its degree to indemnify
an insured in the event of a loss by reason of a
defect or flaw of title PRIOR to the date of
policy. All other forms of insurance agree to
indemnify the insured in the EVENT OF LOSS due to
a FUTURE event and after the date of the policy.
Basically, title insurance
is the company’s opinion concerning the ownership
and marketability of title to a particular parcel
of real property. This can only be ascertained
after a thorough and complete search of all the
records affecting title to the parcel insured. A
title company is a service organization and
performs a service for those interested in buying,
selling, or loaning money on real estate. When you
purchase a title insurance policy, you are buying
the services of experts. The company is willing to
back the opinion of these experts with the
additional feature of insurance.
Title insurance, in effect,
insures marketable title which is, in essence,
title that a prudent man, well advised as to the
fact in law, would be willing to accept.
Title insurance policies,
however, do not insure against several major areas
which are either too difficult or too expensive to
cover, including defects in title known to the
insured, easements and liens not shown by the
public records, interest of parties in possession,
or matters requiring an accurate survey.
When dealing with real
property, title of the seller cannot be assumed.
We must ascertain and then be assured that what we
bargain for is in fact owned by the seller. A
purchaser of real property is not satisfied with
assurance that he will not be dispossessed of his
property or that no adverse claim may appear to
harass his quiet enjoyment of the property. Every
person, when purchasing real property, wants to
know that he will be able to sell, lease, or
mortgage the property freely. Because there are as
many interests in land as there are leaves on a
tree, a purchaser wants to be assured that his
title to the land is marketable.
Title insurance is often
required to protect the lender against loss if a
flaw in title is not found by the title search
made when the house is purchased. You may also get
an owner’s policy to protect yourself. Also,
attorneys provide title insurance as part of their
services in examining title and providing a title
opinion.
It is important to remember
that a title insurance policy issued only to the
lender does not protect you. Similarly, the policy
issued to a prior owner, such as the person from
whom you are purchasing the property, does not
protect you. To protect yourself from loss because
of a mistake made by the title searcher, or
because of a legal defect which does not appear on
the public records, you will need an owner’s
policy. Such a mistake rarely occurs, but, when it
does it can be financially devastating to the
uninsured. When you buy an owner’s policy it is
usually much less expensive if purchased
simultaneously with a lender’s policy. In
addition, if you are buying a home which has
changed hands within the last several years,
inquire at the title company that issued the
previous title insurance about a “reissue rate”
which could be a lower charge than the cost of a
new policy.
