Because we know Title Insurance can sometimes be a little confusing…
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What is Title Insurance?
Visit Texas Department of Insurance’s website: http://www.tdi.texas.gov/title/index.html
A title is the collective ownership records of a piece of real estate, including the transfer of any property rights and any loans using the property as collateral. A clear line of title makes you much less vulnerable to ownership claims from other parties and to any outstanding debts of previous property owners. Title insurance protects you against losses arising from problems with your property title that were unknown to you when you bought the property.
Title insurance only protects you from claims of ownership. It does not insure against fire, flood, theft, or any other type of property damage or loss.
Before writing a title insurance policy, a title company will check for defects in your title by examining public records, including deeds, mortgages, wills, divorce decrees, court judgments, tax records, liens, encumbrances, and maps. The company will then defend you in court if there is a claim against your property, subject to certain limitations. If the company loses, it will pay you for covered losses up to the amount of your policy.
Most people purchase title insurance from the title company that closes the sale of their property. The company will hold any earnest money in a trust account until the purchase is complete.
What are the General Features of Title Insurance?
Protection: If a future valid claim against the title to real property results either in the loss of title to the property, or expenses to clear up title defects uncovered by such claims, title insurance will provide compensation up to the face amount of the policy.
Legal defense: Should a future claim against the title to property require legal defense, the title company may work with the insured to provide for legal defense of the title and to pay the cost of defense, even if the costs exceed the face amount of the policy. This is true regardless of how many claims are brought during the life of the policy.
Up-to-date information: A title search of the public records conducted prior to issuing a title insurance policy may reveal the rights a buyer has with regard to future development of the property. These include right- of-way, easements, etc., as well as restrictions that may have been placed on the use of the property by previous owners.
One-time premium payment: For the cost of a single, one-time premium, title insurance can protect the property owner against loss resulting from any title defects to the property covered in the policy for as long as the property is owned.
What are the Principal Forms of Title Insurance?
There are Two Principal Forms of Title Insurance:
The Owner's Policy, which protects the property owner against loss resulting from defects in the title.
The Loan Policy, which insures that the holder of the mortgage has a valid lien on the property and indemnifies the holder of the mortgage against loss resulting from title defects insured against. Why are two kinds of policies sometimes needed on a single property? If a buyer pays cash for a property, only owner's title insurance is needed. In cases where money is borrowed to purchase the property, the Loan Policy protects the lender's invested capital by insuring a valid lien in case the mortgage is foreclosed.
What is the difference between property or casualty insurance and title insurance?
Property/Casualty insurance protects the property owner against future events that might adversely affect the value of his or her property, such as fires, floods, etc. It is written for a fixed term for which the company receives a stated premium. At the end of this period, premiums may increase or decrease in line with the company's loss experience. A title insurance policy, on the other hand, is or can be perpetual as to term. Only one initial premium is charged for the risks that are assumed and carried over the years.
*Information on this web site is not intended as legal advice. Title Insurance Coverage may vary by state.