The title company, to protect the rights of the buyer or the lender of residential or commercial property, provides a Title Insurance Policy, protecting them from any problems arising from the past history of the property that is not disclosed in the title search.
Two kinds of Title Insurance Policies may be issued but only after that thorough title search of all public records relating to the property, has been conducted by a title professional. The title search looks for any possible flaws to a clear title (such as unpaid taxes, unsatisfied liens, undeclared heirs or any other undisclosed problem)
and must be completed before either of the types of policy may be written:
The Lender’s (or Loan) Policy assures the mortgage lender that their institution will not be impacted by undisclosed title problems discovered after the title search has been completed. This policy covers the lender for the amount of the loan and declines accordingly as the loan is
paid off. Most lenders require a Loan Policy as security for their investment in real estate.
The Owner’s Policy> covers the buyer and insures that the title company will stand with them to resolve any problems found after the purchase has been completed. The buyer will not be liable for any title flaw that has arisen from the property’s history before they purchased it.
The Owner’s Policy will stay in effect for as long the buyer owns the property. The title company will help pay valid claims and cover the costs of defending any attack on the title.
A Title Insurance Policy eliminates much of the risk for both buyer and lender and allows those purchasing property to know they are protected again claim and loss. For mortgage lenders, a Title Insurance Policy insures their investment is safe.
For more information on finding a Title Insurance Policy, visit the website of the American Land Title Association (ALTA) by clicking here.