When purchasing a home or other real estate, you acquire title to the property which may be limited by rights and claims asserted by others.

Problems with title can limit your use and enjoyment of real estate, as well as bring financial loss. Title trouble also can threaten the security interest your mortgage lender holds in the property.

Protection against hazards of title is available through a unique coverage known as title insurance. Unlike other kinds of insurance that focus on possible future events and charge an annual premium, title insurance is a one time premium and is a safeguard against loss arising from hazards and defects already existing in the title.

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Know the Difference

There are two major types of title insurance:

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• Owners coverage

• Lenders or mortgagee protection

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Owners title insurance ordinarily is issued in the amount of the real estate purchase price and lasts as long as the insured or his/her heirs have an interest in the property.

Most lenders require mortgagee title insurance as security for their investment in real estate, just as they may call for fire insurance and other types of coverage as investor protection. The amount of lenders title insurance decreases and eventually disappears as the loan is paid off.

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Risk Elimination

An important part of title insurance is its emphasis on risk elimination before insuring. This means the insured has the best possible chance for avoiding title claim and loss.

Title insurance begins with a search of public land records for matters affecting the title to the real estate concerned. The examination of evidence from a search is intended to fully report all material objections to the title. Frequently, instruments that don’t clearly pass title are found in the chain, or history, of ownership assembled from the records search. These need to be corrected before a clear title can be conveyed. Here are some examples of instruments that can be present concerns.

• Deeds, wills and trusts that contain improper vestings and incorrect names

• Easements

• Outstanding mortgages, judgements and tax liens

• Incorrect notary acknowledgements

Through the search and the examination, title problems like these are disclosed so they can be cleared up whenever possible. But even the most careful preventive work cannot always locate hidden hazards of title.

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