In addition, 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.

What Types of Policies Are Available to Me as a Homeowner?

For the average property owner, there are two different types of title insurance policies that you need to be aware of:

• Owner's Policy of Title Insurance
• Loan Policy of Title Insurance

Since most property owners mortgage or borrow money at the time of purchase or during ownership, the lender can be expected to request protection of its investment against loss. Lenders know that many things can cause loss of title and that expenses are incurred while defending an attack. They insist upon a Loan Policy of Title Insurance to protect their stockholders' and investors' investment in your property.

An Owner's Policy of Title Insurance protects your investment (equity) as the buyer or owner of the property. As the owner, you should want to have the same assurance as the lender that the investment you have made cannot be lost because of a problem or defect with the title.

How Does Title Insurance Differ from Other Types of Insurance?

Title insurance is different from other types of insurance in that it protects you, the insured, from loss that may occur from matters or defects from the past. Other types of insurance such as auto insurance, life insurance, or health insurance, cover you against losses that may occur in the future. Title insurance does not protect against a defect that may originate at a later date.

What Are the Risks?

There are numerous defects or problems that can arise to cause an attack to or loss of the title to your property. Some of these include problems not disclosed by the most careful search of the public records (the title search). Hidden risks can cause a total loss of your investment or heavy legal expenses in the defense of an attack on the title.

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

How Does Title Insurance Protect Against these Hidden Risks and Defects?

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 placing title in the name of the insured, the title was free of defects apart from those excepted to in the policy. The policy does not guarantee an actual amount of land. It guarantees that there are no buildings or other improvements belonging to someone else located on the insured land when an acceptable survey is furnished to the title company. An additional premium is paid to amend the standard survey exception.

Isn't Purchasing Both the Owner's and Loan Policies a Double Payment or Duplicate Coverage?

No, it's not a double payment or duplicate coverage. The Loan Policy protects the lender's interest only so long as the loan is outstanding and only in the amount of the balance of the loan at any given time. The Owner's Policy protects you up to the face amount of the policy during your ownership and after you have sold the property if you have warranted the property to your subsequent buyer.

After arranging a loan, you pay a premium for the purchase of the Loan Policy based on the amount of the loan. If you desire to purchase an Owner's Policy at the same time, you pay an additional premium only for the difference that covers your equity or investment in the property together with a small simultaneous issue fee. Because of this, you do not pay twice for the two policies.

If you buy your Owner's Policy separately, you pay the full premium for the policy. Likewise, if you refinance or borrow additional money at a later time, you can expect to pay additional premiums for the new policies, if required.