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WHAT IS TITLE INSURANCE?
- Title insurance insures against adverse claims arising from the past
occurrences in the chain of title to a specific piece of
property. The title policies specify in whom the legal
estate is vested and protect the insured party against any
loss they may sustain as a result of past title defects.
It is usually issued as either a “Loan” policy or an
“Owner's” policy.
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SHOULD YOU
PURCHASE TITLE INSURANCE?
- Common questions that arise at closings are, “Should I
buy title insurance?” and “What protection do I get from
title insurance?” Most of the time these questions are
specifically directed to the issue of “Owner’s Coverage”
title insurance.
1. A Loan
Policy is required in almost all residential real estate
closings where a mortgage is used to finance part of the
purchase price. Such a policy is issued in favor of the
lender and does not protect the borrower's. title. The
lender requires a Loan Policy to protect its mortgage
interest in the property. This insurance is paid for at
closing, is issued for the amount of the loan, remains in
effect for the life of the loan and insures only
the mortgage lender. Even though a borrower must pay the
premium for the Loan Policy, it does not protect the
borrower against any loss.
2. Owner’s
coverage is issued for the purchase price of the property,
requires an additional premium and extends coverage to the
property owner for as long as they own the property. An
Owner's Policy insures against title defects that are not
covered by an attorney's opinion or title report. An
attorney's opinion of the quality of the record title may
not account for many title defects that could easily be
missed even after an extensive search of the county
records. Common examples of the protection afforded by
title insurance would be protection against mistakes in
public records or mistakes in the title search and
examination. Also, protection is afforded against forged
or unauthorized signatures on deeds or other documents and
instruments executed under an expired or fabricated power
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3. The Owner's Policy provides you with immediate legal support in
the event of a claim. If a defect is identified, an underwriter
will quickly take action to remedy the defect. If the matter is
covered by the Owners Policy, all of the time, money and effort to
correct it will be absorbed by the insurance company.
4. The recent Erpenbeck scandals that affected many people in
Northern Kentucky and Greater Cincinnati emphasized the benefits of
title insurance. Most of the lenders who had loaned money on
purchased Erpenbeck homes were covered by lender’s title insurance
and incurred no loss. On the other hand, very few of the homeowners
had purchased owner’s coverage. Consequently, the protections
afforded to the mortgage lenders were not available to them. The
few homeowners who had purchased owner’s coverage were certainly
glad that they had.
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