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Why Do You Need a Title Insurance Policy?

If title insurance companies work to eliminate risks and prevent

losses caused by defects in the title before the closing, why

do you need a title insurance policy? The title to the property

could be seriously threatened or lost completely by hazards

which are considered hidden risks—“those matters, rights or

claims that are not shown by the public records and, therefore,

are not discoverable by a search and examination of the

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 the property has

been purchased.

Title insurance isn’t just for a homeowner. Subdividers need

it when planning a new tract of homes or a commercial

strip center. Attorneys use it for clients who are investing in

shopping centers, hotels, office buildings and countless other

projects. Builders need it in order to obtain construction loans

from their lender. Everyone wants to have peace of mind when

investing their hard-earned money. The title insurance company

will help protect these important investments, no matter how

large or small, with its own reputation and financial strength.

Why Does the Lender Need a Policy on My Property?

For the lender, a title policy is a guarantee that it has a valid

and enforceable lien (loan or deed of trust) secured by the

property, that no one else other than those listed on the

policy has a prior claim (or loan, etc.) and that the party

to whom they are making the loan does own the property

being used as security for the loan. This protection remains

in effect as long as the loan remains unpaid.

The existence of a lender’s title policy encourages lenders

such as banks, savings and loan associations, commercial

banks, life insurance companies, etc., to loan money.

Because they are lending other people’s money (savings or

policy holder’s funds), they must be concerned with safety

should the borrower not make their payments. The title

company insures that the title to the property is marketable

in the event of foreclosure and the guarantee is backed by

the integrity and solvency of the title company. Of course,

this benefits everyone—from the single-family homeowner

to the owner of a high-rise building.

What is Title Insurance?

The purchase of a home is often the single largest investment

people will make in a lifetime; therefore, the importance of fully

protecting such an investment cannot be over stressed. Title

insurance is protection which assures that the rights and interests

to the property are as expected, that the transfer of ownership

is smoothly completed and that the new owner receives

protection from future claims against the property. It is the most

effective, most accepted and least expensive way to protect

property ownership rights.

Because land endures over generations, many people may develop rights and claims

to a particular property. The current owner’s rights—which often involve family

and heirs—may be obscure. There may be other parties (such as government

agencies, public utilities, lenders or private contractors) who also have “rights” to the

property. These interests limit the “title” of any buyer.

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© Ticor Title Company

WHAT IS TITLE? - FAQ