Title insurance protects an owner from hidden title defects that even the most careful title search may not discover. Title insurance also often covers the cost of defending against any covered claim. Title insurance coverage falls into two categories; owner’s and lender’s policies.
Owner’s Policies of title insurance assure the purchaser that the title to the property is free from defects or rights ofothers that could not be disclosed by the title examination. Owners’ title insurance reduces some of the risk of buying property, especially when the chain of ownership is long and unknown to you. While hidden risks are not common, they do exist and can cause you substantial financial loss related to your home.
Examples of some “hidden risks” covered by an owners title insurance policy are: false impersonations of the true owner in the chain of ownership; confusion caused by similar names; unpaid child support liens; unpaid taxes (local, state and federal); unrecorded rights of way (easements); forged deeds and other documents; signatures by minors or those not mentally competent to sign; signatures of those represented as single who are really married; errors in recording by officials; clerical errors in public records; undisclosed or missing heirs; documents executed under an expired power of attorney; fraud and/or invalid divorces. All of these are valid reasons to procure title insurance. You do not want problems from prior owners to interfere with your enjoyment of the property. Nor do you want to finance expensive litigation to defend your property rights in court. Owner’s title insurance is a one-time premium payment and (although optional) is a very good investment.
A Lender’s Policy is required by every public mortgage lender, but does not protect the property owner. Lenders policies protects the lender only and is generally required.