Friday, November 2, 2007

Title Insurance FAQ

Q: What is title insurance?

A: An insurance policy--protecting against loss should the condition of title to land be other than as insured.



Q: Why do I need title insurance?

A: When you buy a home, or any property for
that matter, you expect to enjoy certain benefits from ownership. For example,
you expect to be able to occupy and use the property as you wish, to be
free from debts or obligations not created or agreed to by you, and to be
able to freely sell or pledge your property as security for a loan. Title
insurance is designed to cover these rights you bargain for.



Q: What if I have a problem?
Do I
have to lose my property to make a claim?


A: Not at all. At the mere hint of a claim
adverse to your title, you should contact your title insurer or the agent
who issued your policy. Title insurance includes coverage for legal expenses
which may be necessary to investigate, litigate or settle an adverse claim.




Q: What does this cost?

A: The cost varies, depending mainly on the
value of your property. The important thing to remember is that you only
pay once, then the coverage continues in effect for so long as you have
an interest in covered property. If you should die, the coverage automatically
continues for the benefit of your heirs. If you sell your property, giving
warranties of title to your buyer, your coverage continues. Likewise, if
a buyer gives you a mortgage to finance a purchase of covered property from
you, your coverage continues to protect your security interest in the property.




Q: If my lender gets title insurance for its mortgage,
why do I need a separate policy for myself?


A: The lender's policy covers only the amount
of its loan, which is usually not the full property value. In the event
of an adverse claim, the lender would ordinarily not be concerned unless
its loan became non-performing and the claim threatened the lender's ability
to foreclose and recover its principal and interest. And, in the event
of a claim there is no provision for payment of legal expenses for an uninsured
party. When a loan policy is being issued, the small additional expense
of an owner's policy is a bargain.



Q: Can you be a little more specific about the types of claims,
or risks, covered by title insurance?


A: Sure. First understand there are basically
three different levels of coverage: Standard coverage, extended coverage,
and our most comprehensive "EAGLE Policy" coverage.


Standard coverage handles such risks as:

  • Forgery and impersonation;
  • Lack of competency, capacity or legal authority of a party;
  • Deed not joined in by a necessary party (co-owner, heir, spouse, corporate
    officer, or business partner);
  • Undisclosed (but recorded) prior mortgage or lien;
  • Undisclosed (but recorded) easement or use restriction;
  • Erroneous or inadequate legal descriptions;
  • Lack of a right of access; and
  • Deed not properly recorded.


An extended coverage policy may be requested to protect against such
additional defects as:

  • Off-record matters, such as claims for adverse possession or prescriptive
    easement;
  • Deed to land with buildings encroaching on land of another;
  • Incorrect survey;
  • Silent (off-record) liens (such as mechanics' or estate tax liens);
    and
  • Pre-existing violations of subdivision laws, zoning ordinances or CC&R's.


Subject to availability in your locale, First American's EAGLE Policy
covers all of the risks listed above, plus:

  • Post-policy forgery;
  • Forced removal of improvements due to lack of building permit (subject
    to deductible);
  • Post-policy construction of improvements by a neighbor onto insured
    land; and
  • Location and dimensions of insured land (survey not required).


For a more detailed list of covered risks, visit "70-Something Ways to Lose Your Property" elsewhere on this website. And for some true "horror stories," from actual First American claim files, check out "Claims Chronicles."



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