What are Title Insurance Policies - Do You Need Title Insurance?
To understand title policy insurance in America, let's look at chain-of-title and how title companies search the public records. Title insurance companies aren't really concerned with where dinosaurs once roamed, whether our ancestors trekked across the Bering Straight or where American Indian tribes settled. Title searches begin with when the United States government stole the land, I mean claimed it -- from the U. S. patent -- and move forward from that point.
Title Insurance Policies
Because humans are involved in recording deed transfers and plotting land parcels, a lot can go wrong. You want title insurance because it will protect you against defects and human error.
Title Search Basics
Title searches start with the most recent deed, searching the grantee's name (the person now holding title) backwards in time, until the deed when the grantee acquired the property is located.
That grantor's name is then searched backwards in time in the grantee's book to find when the grantor acquired title as a grantee.
This process continues, and over time, the property description involves larger and larger parcels of land.
Eventually, the searcher finds the U. S. Patent.
Other Factors Affecting Title
Deeds establish chain-of-title, but sometimes those chains are broken. In addition, title searchers also look for reconveyances (proof that the encumbrances are paid off), and they look for easements, rights-of-way, CC&Rs, other elements affecting title to the property. Here are more records that are searched to piece title together:
Title Insurance Coverage
Depending on the title company, consumers can choose among a variety of options, but the top three choices are Owners, Lender's and Extended Coverage.
Basic Owner's Title Policy Coverage:
Clear title to the property
Incorrect signatures on documents
Encumbrances or judgments
How Long Are Title Policies Good For?
Forever, theoretically. If you are planning to resell the property within a couple years, ask your title company about "binder" coverage. Most companies will sell you a binder policy for 10% more. A binder is good for two years, often can be extended beyond that time, and the fee charged for the new buyer's policy will be the difference between what you bought the property for and the price at which it sold. In other words, you will get a credit for the amount of coverage you purchased under your own Owner's Title policy.
How Often Are Title Policy Insurance Premiums Paid?
Once. The fee is due when you buy. You will never pay it again. Title policy insurance is the best insurance policy you can ever buy.