The Importance of Title Insurance in Home Ownership

Real estate has traditionally been the most valuable asset a person holds. It is a form of wealth protected by many laws. These laws have been enacted to protect one’s ownership of real estate and the improvements located on the land. The owner, owner’s family, and the owner’s heirs have rights or claims in the property you are buying. Those who may have an interest in or lien upon the property could be governmental bodies, contractors, lenders, and the IRS just to name a few. 

The Past Can Determine Your Future

Generally, a person thinks of insurance in terms of the payment of future loss due to the occurrence of some future event. For instance, a party obtains automobile insurance in order to pay for future loss occasioned by a future “fender bender” or for the future theft of the car.  Title Insurance is a unique form of insurance. It provides coverage for future claims or future losses due to title defects which which are created by some past event (i.e., event prior to the acquisition of the property.) These risks are far less obvious than those protected against by automobile insurance, but can be just as devastating. 

How Do You Find Out What Claims Exist?

In order to determine the status of title, Chicago Title conducts a search of the public records for those documents associated with the property. Those documents are then examined in order to determine if there are any rights or claims that may have an impact upon the title to the property. The title search may reveal the existence of recorded defects, liens or encumbrances upon the title such as unpaid taxes, unsatisfied mortgages, judgments and tax liens against the current or past owners, easements, restrictions and court actions. These recorded defects, liens and encumbrances are reported to you prior to your purchase of the property. Once reported, these matters can be accepted, resolved or extinguished prior to the closing of the transaction.  In addition, you are protected against any recorded defects, liens or encumbrances upon the title that are unreported to you and which are within the coverage of the particular policy issued in the transaction. This is the first benefit you receive from title insurance.

What About Undiscovered Claims?

The title to the property that you have purchased could be seriously threatened or lost completely by hazards which are considered “hidden risks”. ”Hidden Risks” are those matters, rights or claims that are not shown by the public records and, therefore, are not discoverable by a search and examination of 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 you have purchased the property. In order to protect you against this possibility, Chicago Title provides insurance coverage for such claims. This is the second benefit your receive from title insurance. 

How Does a Title Insurance Policy Protect Against All These Claims?

If a claim is made against your insured title, Chicago Title Insurance Company protects you by: (1) Defending your title, in court if necessary, at no cost to you, and (2) Bearing the cost of settling the case, if it proves valid, in order to protect your title and maintain your possession of your property. 

Title Insurance Protects Your Asset

Title insurance gives you the assurance that possible clouds on title to the property you are purchasing – which can be discovered from the public records – have been called to your attention so that such defects can be corrected before you buy. Additionally, it is insurance that if any undiscovered claims covered by your policy arises out of the past to threaten your ownership of real estate, it will be disposed of, or you will be reimbursed exactly as your title insurance policy provides. 

Only One Premium

Finally, unlike automobile or health insurance, the original single premium paid at the time of purchase is your only cost as long as you or your heirs own the property. There are no annual payments to keep your Owner’s Title Insurance Policy in force. And with Chicago Title’s most comprehensive policy, the value actually increases 10% each year for five years. For example, a policy on a $500,000 home will be worth in liability terms, $750,000 at the end of five years. With an average policy premium of less than $2000, the cost is a small price to pay for the security title insurance provides.