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What Is Title Insurance?

December 10, 2019 by Mark Mellor

what is title insurance

If you’re in the process of preparing to buy or sell a home, you may be wondering whether or not you need title insurance. Most real estate agencies will say absolutely, especially for homeowners. A property is most people’s greatest investment, and one that’s not worth risking.

What is Title Insurance?

Title insurance is a type of indemnity insurance that is utilized in real estate transactions to protect your ownership rights in the event of claims against them. Generally, a title insurance plan is used to protect sellers and mortgage lenders against monetary loss that may result from disputes or defects relating to the transfer of a title from one owner to another. It can also be used to protect against the losses that come from unenforceability of liens held by mortgage lenders.

How Title Insurance Is Issued

Title insurance is issued by authorized insurance companies. The process is generally two-fold: first, the title company or lawyer reviews the seller’s property records to ensure there are no unpaid taxes, fraud charges, or undisclosed heirs to the property. This process is conducted in order to verify that the seller does, indeed, own the right to sell the property and take out title insurance.

Next, your title company will contract an underwriting company to issue the policy. This policy will ensure that the title company protects you in the event that someone disputes your title. If you lose a dispute, the company will compensate you for your equity.

The Benefits of Title Insurance

There are several benefits of getting title insurance for both homeowners and lenders. For homeowners, these benefits include the following protections against defects or flaws in the title up to the amount of the policy:

  • Fraud
  • Prior liens that have not been released
  • Undiscovered easements
  • Inadequate property descriptions
  • Errors in recording or indexing of tax records or legal documents
  • Misinterpretation of wills
  • Missing heirs
  • Forged deeds or releases
  • Unpaid mortgages, or other liens
  • Unpaid real estate taxes
  • Unmarketable title
  • And more

These protections are good for as long as you or your heirs own the property and save you from costly attorneys’ fees and other defense expenses.

Another major benefit of title insurance is that several lenders require homeowners to have it when it comes to financing the purchase of your property. Lenders also benefit because it protects them from financial loss for covered risks and makes sure the only lien against the property is the mortgage. Homeowners generally pay for lenders’ policies.

There are also some policies that can also give the owner protection against losses incurred. Extended coverage for losses can include losses that are caused because of the following issues:

  • Someone refusing to purchase your land because the structures of your neighbor’s are on your land
  • Damage to your house caused from someone with easement rights
  • Building permit restrictions, conditions, covenants, violations
  • Improvements that encroach into an easement
  • Subdivision law violations
  • Zoning violations

Overall, title insurance provides a great amount of protection for both homeowners and lenders.

Need Help Litigating Disputes and Claims?

At Mellor Law Firm, we have many years of experience in real estate law and an exceptional track record when it comes to litigating disputes and claims associated with title insurance. If you need help litigating a title dispute, contact us today for more information.

Filed Under: Real Estate Education

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The Mellor Law Firm, APLC
6800 Indiana Avenue, Suite 220
Riverside, CA 92506
Phone: (951) 221-4744
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