What is title insurance?
Title insurance is a type of insurance that helps protect against losses that could occur if you discover after closing that someone else can claim ownership of your property.

What is a title examination, or title search?
It's a close examination of all public records that involve title (deed) to a piece of real estate. The person conducting the search looks at past deeds, wills, and trusts to make sure the title has passed correctly to each new owner. The examiner tries to verify that all prior mortgages, judgments, and other liens have been paid in full. A title search should uncover potential problems, such as rights others may hold (right of ways, view easements, power line easements, mineral rights), claims by prior undisclosed heirs, and pending legal actions.

What are "clouds" on a title?
A "defect" or "cloud" on the title is a problem that makes ownership questionable. For instance, a previous owner sold the property 15 years ago. His wife was listed on the deed but for some reason did not sign-off at closing. Her interest in the property is a "cloud" and must be removed to clear the title.

If the title looks good why do I need title insurance?
Because no one is perfect. In my state the examination covers all aspects of ownership during the 40 years prior to closing. Even an expert title examiner can miss a defect that might crop up to create problems for you later.

What does a title insurance policy cover?
Correction for problems that did not show up during the title search or were missed by the examiner. Errors in public records.

What if title problems are found after closing?
The policy will pay your legal fees if you must go to court to defend your deed. If you lose the property the insurance should pay you for the loss up to the amount of the policy.

What types of title problems are not covered?
A title insurance policy does not cover defects that occur after you purchase the property. Policies often exclude problems with easements, mineral and air rights, and liens. Ask your attorney or closing agent for an explanation of all exclusions, and for a recommendation as to which items should be cleared up prior to closing.

Do I have to buy title insurance?
Not if you're paying cash for the property. If you're obtaining a mortgage the lender will require a policy in its name to cover its interests. The lender may or may not require you to buy a policy for your own protection.

To whom is the policy issued? Who is paid if there's a problem?
A lender's policy is usually issued for the amount of the mortgage. It pays the lender if a problem surfaces. An owner's policy covers the property's full sales price and insures the owner against loss.

Who pays for title insurance?
You do, unless your state requires the home seller to pay. Even if it's not required home buyers can ask the seller to pay for the policy. Buyers may be able to save money on the title search and policy if the present owner's policy can be updated and reissued. Ask your closing agent if that's possible.

How often must I pay the title insurance premium?
Title insurance policies are paid in-full with a one-time fee which is usually part of closing costs.

Am I protected if my home increases in value?
Ask about inflation riders for your title policy. They increase the coverage amount as the property's value increases. Title insurance is a relatively inexpensive item and can be one of the best purchases you'll make for your new home. Title insurance isn't a magic bullet--if problems occur you'll still have to deal with them and sometimes it's not easy to get action from the title insurance company. But overall you'll sleep a little better knowing you have some protection if a long-lost heir of the former owner shows up on your doorstep.