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Buying a home is probably one of the most substantial investments you will every make. To help protect this investment, your real estate professional should recommend the purchase of an owner's policy of title insurance.

What is Title Insurance?

Title insurance applies the principles of insurance to the risks that are present in all real estate transactions.

These risks are primarily those of hidden hazards and human error. Title insurance is issued after a complete and thorough title search. And, even when performed by experienced title examiners, a title search is simply a search of public records, and substantial defects may not be discovered.

So, what does title insurance protect against?

To name a few:

  1. Mistakes in recording of legal documents
  2. Forged deeds, releases or wills
  3. Undisclosed or missing heirs, including spouses
  4. Deeds by persons of unsound mind
  5. Deeds by minors
  6. Deeds executed under invalid or expired power of attorney
  7. Liens for unpaid taxes
  8. Fraud

When you obtain a mortgage, the property you purchase is pledged as a security for the loan. To protect against risk, the lender requires assurance that the title to the property is clear, and this is done through a loan policy of title insurance. However, without an owner's policy of title insurance, the buyer is unprotected.

An owner's policy of title insurance is a contract that protects you, according to the contract terms, against loss or damage due to title defects. This contract is backed by the known assets and reserves of the title insurance underwriter and serves as a written guarantee that your underwriter will undertake, at its own expense, the defense of your title in all legal actions or proceedings alleging the title to be other than as insured.

For a one-time premium, paid during the closing process, an owner's policy of title insurance protects against further losses arising out of events that may have happened in the past. In most cases, an owner's policy can be issued at the same time as the loan policy, usually for a nominal one-time fee.