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Real estate has traditionally been a family's most valuable asset. It is a form
of wealth that is protected by many laws. These laws have been enacted to
protect one's ownership of real estate and the improvements located on the
land. The owner, the owner's family, and the owner's heirs may have rights or
claims in and to the property that you are buying. Those who may have an
interest in or lien upon the property could be governmental bodies,
contractors, lenders, judgment creditors, the Internal Revenue Service, or
various other individuals or corporations. The real estate may be sold to you
without the knowledge of the party having a right or claim in and to the
property. In addition, you may purchase the real estate without having any
knowledge of these rights or claims. In either event, these rights or claims
remain attached to the title to the property that you are buying until they are
Past Can Determine Your Future
Generally, a person thinks of insurance in terms of the payment of future loss
due to the occurrence of some future event. For instance, a party obtains
automobile insurance in order to pay for future loss occasioned by a future
"fender bender" or for the future theft of the car. Title insurance
is a unique form of insurance. It provides coverage for future claims or future
losses due to title defects which are created by some past event (i.e., event
prior to the acquisition of the property.) These risks are far less obvious
than those protected against by automobile insurance, but can be just as
devastating. The following information will answer some commonly asked
questions about title insurance.
Do Title Insurance Companies Find Out What Title Risks Exist?
In order to determine the status of title, credible title insurance companies conduct a
diligent search of the public records for those documents associated with the
property. They then examine those recorded documents in
order to determine if there are any rights or claims that may have an impact
upon the title to the property. The title search may reveal the existence of
recorded defects, liens or encumbrances upon the title such as unpaid taxes,
unsatisfied mortgages, judgments and tax liens against the current or past
owners, easements, restrictions and court actions. Matters that are discovered
in the search can be excepted, resolved or extinguished prior to the closing of
the transaction. In addition, you are protected against any loss or damage
resulting from recorded defects, liens or encumbrances that are within the
scope of coverage of the particular policy issued in the transaction.
About Hidden Title Risks?
The title to the property that you have purchased could be seriously threatened
or lost completely by hazards which are considered "hidden risks."
"Hidden Risks" are those matters, rights or claims that are not shown
by the public records and, therefore, are not discoverable by a search and
examination of those public records. Matters such as forgery, incompetency or
incapacity of the parties, fraudulent impersonation, and unknown errors in the
records are examples of "hidden risks" which could provide a basis
for a claim after you have purchased the property. Policies issued by
credible title insurance companies protect you against many of these “hidden risks.”
Does a Title Insurance Policy Protect an Insured Owner?
In the event of a covered matter affecting your title, your insurance policy
may protect you in various ways including: (1) Defending your title, (2)
Bearing the cost of settling the covered matter, or (3) Paying you for the loss
due to the covered matter.
Unlike other forms of insurance, the original premium is your only cost as long
as you own the property. There are no annual payments to keep your Owner's
Title Insurance Policy in force.