Title insurance
From Wikicpa
A policy of title insurance is a contract of indemnity between the insurance company and the owner of an interest in real property. In plain English, this means that in the event that the insured owner of an interest in the insured property suffers an actual or threatened monetary loss, due to a title defect, lien or other matter of public record created prior to the effective date of the policy, that is not excluded as an exception to the policy, the title insurer will defend the insured against a lawsuit attacking the title, or reimburse the insured for the actual monetary loss incurred, up to the dollar amount of insurance provided by the policy. Typically the real property interests insured are fee simple ownership or a mortgage. However, title insurance can be purchased to insure any interest in real property, including an easement, lease or life estate.
Title insurance differs in several respects from other types of insurance. Where most insurance is the contractual "coverage"emium for the policy may be paid by the seller or buyer as the parties agree; usually there is a custom in a particular state which is reflected in most real estate contracts. Consumers should be wary of real estate contracts which provide that they pay for title charges without having knowledge of what those charges are. A real estate attorney, broker or loan officer should provide detailed information to the consumer as to this "title" pricing issue before the real estate contract is signed. Title insurance coverage lasts as long as the insured retains an interest in the land insured and typically no additional premium is paid after the policy is issued.
Lender's Policy
In addition to the coverages provided on the owner's policy, this type of policy also insures the validity and enforceability of the lien of the lender's mortgage or deed of trust. The lender's policy protects the lender for the amount of money lent against the property. As the loan is paid down, the amount of coverage decreases, and once the loan is paid off, coverage under the policy terminates. The insurer's risk, therefore, under a loan policy is less than that of an owner's policy; as a result, insurers will charge lower premiums for a loan policy than would be charged for the same dollar amount of coverage on an owner's policy.
The American Land Title Association is a national trade association of title insurers. ALTA promulgates standard forms of title insurance policy "jackets" (standard terms and conditions) for Owner's, Loan and Construction Loan policies. ALTA forms are used in most, but not all, states in the USA. ALTA also promulgates special endorsement forms for the various policies; endorsements amend and typically broaden the coverage given under a basic title insurance policy. Some states such as Texas and New York may mandate the use of forms of title insurance policy jackets and endorsements approved by the state insurance commissioner for properties located in those jursidictions, but these forms are usually similar or identical to ALTA forms.
Title insurance premiums are regulated or fixed in some states including Texas and Florida. Other states do not regulate title insurance premiums but instead rely on the marketplace to do so. Lower title premiums are generally found in the unregulated states.
Title insurance companies historically have not marketed extensively to the general public. This is because many Title insurance companies have arrangements/contracts with real estate agents and mortgage lenders. Title insurers concentrate their sales & marketing teams on high-volume, long term customers, like real estate agents and mortgage lenders, which allows the insurer to avoid the cost of marketing to the general public, who quite often, is wholly unfamiliar with every aspect of a real-estate transaction. Accordingly, homebuyers should, prior to closing, explore the issue of title insurance and other closing costs with their attorney, real estate broker and/or lender.
