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Title insurance protects a buyer's ownership rights against legal challenges arising from issues in the property's title history, such as fraudulent transfers or unrecorded liens. It provides financial coverage for legal fees and any losses due to covered claims, up to the coverage limit. Coverage applies to issues that were present before the buyer's ownership began, as well as certain issues that could arise during the recording process after closing but before the deed or mortgage is recorded.

Title insurance covers various hidden risks that could impact ownership, including:

1. False impersonation of a property owner
2. Forged deeds, releases, or wills
3. Documents signed under expired or invalid powers of attorney
4. Claims from undisclosed or missing heirs
5. Mistakes in recording or filing legal documents
6. Errors in interpreting wills
7. Sales involving minors, individuals of unsound mind, or individuals believed to be single but are married
8. Fraudulent acts affecting ownership
9. Liens for unpaid estate, inheritance, income, or gift taxes

No, buyers are not legally required to purchase title insurance. However, if there is a mortgage, the lender will almost always require the buyer to buy a lender's policy to protect the loan. Buyers who pay cash may forego title insurance, but doing so leaves them vulnerable to potential financial loss if ownership issues arise.

Generally, the owner's policy should cover the full purchase price of the property to protect the buyer's investment. A lender's policy typically covers the amount of the loan to secure the lender's financial interest in the property.

What are the steps in issuing a title insurance policy?

• Request for Title Insurance and Records Search The process begins when a client, often the buyer's attorney or the lender, places an order for title insurance. The title agency initiates searches of property records to determine the current state of the title. This includes county records, judgments against involved parties, tax records, and specific checks for environmental or government liens. Search companies or online records are often used to gather this information, and the agency receives a title abstract with all relevant documents.
• Title Examination A title officer carefully reviews and analyzes the gathered records to identify any potential issues. They interpret how each recorded item affects the property's title, using their expertise to provide a comprehensive assessment.
• Title Commitment or Binder The title agency issues a commitment (or "binder" or "title report" in New York) that details the intent to insure the title, the coverage amount, covered parties, and any requirements or exceptions for issuing a final policy.
• Clearing Clouds on Title The title agency addresses any issues or "clouds" on the title, such as outstanding judgments or liens, by contacting involved parties to resolve them. This step involves coordinating with buyers, sellers, lenders, and attorneys to resolve complex title issues and clear the path for a smooth transfer of ownership.
• Closing and Premium Payment Title insurance requires a one-time premium, typically paid by the buyer at closing. Closing may take place at an attorney's office, the title company, or a location agreed upon by the parties involved.
• Policy Issuance and Delivery After closing, the title agency finalizes and issues the policy. The owner's policy is sent to the buyer or their attorney, and the lender's policy is sent directly to the lender.

Although a title search reveals many potential issues, some defects, like forged signatures or misfiled documents, may not be detectable. Title insurance protects against these unknown risks, offering peace of mind and financial coverage if a claim arises.

Standard policies may include a cost-of-living adjustment, but it typically does not keep pace with real estate market increases. To ensure coverage matches property value over time, owners may consider an inflation rider, which increases the coverage amount to align with the property's rising market value.

One common option is a survey endorsement. This endorsement extends coverage to match the property boundaries as shown in an official survey, excluding only specific exceptions noted on the survey (e.g., a fence that extends past the property line or a garage that encroaches on a neighboring lot).

Typically, the buyer pays for both the owner's and lender's title policies as part of the closing costs. In some states, the lender's policy cost is nominal when bundled with the owner's policy premium. Practices can vary, so it's best to confirm with the title company handling the transaction.

In many states, title insurance premiums are regulated by state law, meaning the cost is similar across providers. However, factors such as the age of an existing policy can lead to discounted rates. It is worth asking your title officer about potential rate reductions.

Co-insurance occurs when multiple insurance companies each cover a portion of the total insurance amount — sharing liability. Each insurer's rates apply to their portion of the coverage, and the client has the option to choose the participating co-insurers.

While we facilitate title services in all 50 states, we are currently licensed to provide title insurance services in the following 34 states and district: Colorado (CO), District of Columbia (DC), Delaware (DE), Florida (FL), Georgia (GA), Hawaii (HI), Illinois (IL), Indiana (IN), Kansas (KS), Kentucky (KY), Louisiana (LA), Maryland (MD), Maine (ME), Michigan (MI), Minnesota (MN), Missouri (MO), Mississippi (MS), Montana (MT), North Carolina (NC), North Dakota (ND), Nebraska (NE), New Hampshire (NH), New Jersey (NJ), New York (NY), Ohio (OH), Pennsylvania (PA), Rhode Island (RI), South Carolina (SC), Tennessee (TN), Texas (TX), Virginia (VA), Vermont (VT), Wisconsin (WI), and West Virginia (WV).