Title insurance
is an indemnity policy, protecting the insured
policy from loss arising from defects in
title. Examples of defects may include forged
documents, undisclosed heirs, errors in
recording, or unidentified easements or
encroachments.
The lender requires a Mortgagee's
Title Policy. This policy has a
one-time charge and is written for the amount
of the loan. This policy only protects the
interests of the lender. The Owner's
Title Policy is issued for the
benefit of the borrower. This policy may
be transferable to subsequent owners so
check with the underwriter. It is written
for the full amount of property value. It
is sound practice to obtain both types of
coverage. Most title issuers will provide
dual coverage at a reduced rate. This practice
is commonly known as simultaneous
issue.
While many borrowers feel that title insurance
is another unnecessary charge tacked on
to a real estate transaction, losses from
title defects do occur and has happened
to purchasers of all property types.
