Title Insurance

Definition

Title insurance is a guarantee of title issued by an insurance company.

Purpose

The primary purpose of title insurance is to protect property owners and lenders against losses due to defects in the title, such as liens, encumbrances, or errors in the public record. It ensures that the title to the property is valid and free from disputes.

Examples of Use

1. Real Estate Transactions: Title insurance is typically purchased during the closing of a property sale to protect the buyer and lender.
2. Mortgage Lending: Lenders require title insurance to safeguard their investment in the property being financed.
3. Property Development: Developers obtain title insurance to ensure clear title to the land and protect against legal challenges.

Related Terms

• Deed: A legal document that represents the ownership of property.
• Escrow: A financial arrangement where a third party holds and regulates payment of funds required for two parties involved in a given transaction.
• Lien: A legal right or interest that a lender has in the borrower's property, lasting till the debt obligation is satisfied.

Notes

• Coverage: Title insurance covers legal fees and other costs associated with defending the title against covered claims.
• Types: There are two main types of title insurance: owner’s title insurance and lender’s title insurance.