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Understanding Title Insurance
What is Title Insurance?
Title Insurance provides coverage for certain losses due to defects in the title that occurred during or prior to your ownership. As the Seller, you can give only those rights that previously have been received with “good title”. Title insurance protects against defects such as fraud or forgery and might go undetected until after closing and possibly jeopardize the Buyers’ ownership and investment. It assures the new Buyer that they are acquiring marketable title from the Seller.
The Title Industry in Brief
Prior to the development of the title industry in the late 1800’s, a homeowner received a grantor’s warranty, attorney’s title opinion, or abstractor’s certificate as assurance of home ownership. The Buyer relied on the financial integrity of the grantor, attorney, or abstractor for protection. Today, title insurance companies are regulated by state statute. They are required to post financial guarantees to ensure that any claims will be paid in a timely fashion. They also must maintain their own “title plants” which house duplicates of recorded deeds mortgages, plats, and other pertinent county property records.
Do all Title Companies Offer the Same Protection?
Any standard American Land Title Association (ALTA) policy covers the same basic items. However, First American Title’s EAGLE policy (our ALTA Homeowner’s Policy of Title Insurance*) combines the easy-to-understand “plain language” policy with numerous additional coverages, including coverage for events happening after the policy date.**
Examples
- Post-policy Encroachment. The owner has been in his home for several years when a neighbor builds a patio cover which encroaches (extends ) onto his property. ***
- Post-policy Forgery. Someone forges the homeowner’s name on a mortgage. ***
- Building Permit Violation. A room added prior to the closing date did not receive a city permit and the new homeowner is being forced to remove the structure. ****
*Automatic inflation coverage of 150%, a 10% increase in the policy amount for each of the five years.
** An ALTA Homeowners Title Insurance Policy is requested in Line 117 of the revised AAR Residential Resale Real Estate Purchase Contract, 5/00.
*** The title company through the ALTA policy will provide legal defense.
**** The title company through the ALTA policy will pay for the removal per policy limits.
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