Title insurance is a policy that protects against financial loss stemming from problems found in a property’s title, or legal ownership. The title insurance company agrees to defend you in court if there is an attack on your title. It will cover attorney and court expenses or pay a loss caused by the defect in title up to the face amount of the policy subject to the terms listed in your policy.
Who, When, Where and What in the past?
There are numerous defects or problems that can arise from the past; problems not disclosed by the most careful search of the public records (the title search).
Some title problems may show up months or years after the original purchase of the property. The following are examples of matters that can cause loss of title or an expensive lawsuit:
- Forged deeds, releases, wills, or other legal documents
- Failure of spouses to join in conveyances
- Undisclosed or missing heirs
- Deeds from minors, aliens, or persons of unsound mind
- Errors in indexing of public records
- Liens for unpaid taxes including estate, inheritance, income, or gift taxes
- Erroneous reports furnished by tax officials
- Mistakes in recording legal documents
- Deeds from defunct corporations
- Unprobated wills
As I said, Title insurance defends you in a lawsuit attacking your title and either corrects the title problem or pays the insured’s losses up to the fact amount of the policy. The policy also protects you after you sell the property for the defects occurring prior to your ownership that cause a loss to a purchaser if the title was warranted by you.
The title policy guarantees that at the date the deed was filed for record, the title was free of defects apart from those excepted to in the policy.