What is Title insurance?

Question

What is it for? any advantages? how will it benefit me?

Answer 1

I hope this answers your question...sorry it is so long.

Title Insurance
Finance and Investment Terms
Insurance policies, written by title insurance companies, protecting lenders against challenges to the title claim to a property. Title insurance protects a policyholder against loss from some occurrence that already has happened, such as a forged deed somewhere in the chain of title. If, for example, someone came along claiming that her parents formerly owned the house in question, and that, as beneficiary of her parents' estate, she now deserved to take possession of the property, the title insurance company would defend the present owner's title claim in court. Title insurance premiums are usually paid in one lump sum at the time the policy is issued, and the policy remains in force until the property is sold. Mortgage lenders normally require that borrowers obtain title insurance to protect the lenders' interest in the property. Property buyers also may purchase an owner's policy to protect their interest in the property.

Real Estate Terms
Title Insurance
An insurance policy that protects the holder from loss sustained by Defects in the Title.
Example: When property is purchased, most Mortgage lenders require the buyer to obtain title insurance. After a satisfactory Title Search and in exchange for a one-time Premium the title company insures the buyer against most claims to the title of the property.

Legal Encyclopedia
Title Insurance
A contractual arrangement entered into to indemnify loss or damage resulting from defects or problems relating to the ownership of real property, or from the enforcement of liens that exist against it.

Title insurance is ordinarily taken out by a purchaser of the property, or by an individual lending money on the mortgage, in an amount equivalent to the purchase price of the property. To be entitled to coverage, the purchaser typically pays one lump sum premium, usually at the day of the closing. Title insurance companies are specially organized for this purpose. They retain complete sets of abstracts of title or duplicates of the record, hire expert title examiners, and prepare all types of conveyances and transfers. Following a title search, such companies furnish a certificate of title, indicating the findings of the title examiner with respect to the state of the title to the property involved. Title insurance companies are liable only for a lack of care, skill, or diligence on the part of their examiner when a title certificate is issued up to the face amount of the policy. An insurance of title, however, warrants the validity of the title in any and all events.

American Industry
Title insurance
(SIC 6361)

This classification covers establishments primarily engaged in underwriting insurance to protect the owner of real estate, or lenders of money thereon, against loss sustained by reason of any defect of title.

NAICS CODE(S)

524127 (Direct Title Insurance Carriers)

524130 (Reinsurance Carriers)

Typical title defects result from liens and encumbrances on a property related to unpaid taxes, land use and zoning restrictions, unsettled contractor disputes for work done on the property, and unrecorded deeds. Title insurance also protects the buyer and lender from fraud perpetrated by the seller.

Title insurers must carefully analyze government records and legal documents to determine the risk of defects for a title on a given parcel of property. The insurer must then underwrite an insurance policy for the buyer that reflects the character of the property title under consideration. Although title searches and warranty deeds have been used to assure title validity in the past, title insurance grew in popularity during the 1980s and early 1990s because it was the most absolute form of protection.

The 1990s were a turbulent period for the industry, which experienced one of its worst years in 1991, when operating losses exceeded $190 million. Business stabilized in 1992 as demand for title insurance increased and many companies reported operating profits for the first time in many years. A large drop, however, in the number of refinancings in 1994, due to higher interest rates, placed more financial pressure on companies that carried over into 1995. Large companies such as Chicago Title and Trust Co. and Lawyers Title Insurance Corp. tried to reverse their decline in profits by instituting staff cutbacks and salary reductions.

To combat downward pressure on profits, title insurance companies tried to increase efficiency by automating, laying off employees, improving services, and increasing lines and regions of service through mergers and acquisitions of smaller companies. In addition, many companies were able to find work in the foreclosure industry, serving law firms and banks, and by offering new real estate services (e.g., loan servicing and appraisals). By the late 1990s the industry had ridden out the serious financial hardship that occurred because of problems and rapid fluctuations in the real estate resale and new construction market.

Between 1986 and 1999 the number of companies providing title insurance in the United States fell from 85 to fewer than 70, and the market became increasingly controlled by several large companies. During this time a number of title companies failed; many of the companies that were left merged so as to pool resources and capital. In late 1999, Fidelity National Finance announced the purchase of number-one-ranked Chicago Title Corp. in a $1.2 billion merger. With combined 1998 revenues of $3.4 billion, this merger created the largest title insurance company in the United States.

The industry was using new developments in computer technology to aid in the underwriting process. Several companies were leading the way with artificial intelligence systems designed to predict the likelihood of default by a mortgage borrower and other automated services. PMI Mortgage Insurance Co. instituted an advanced system employing statistical predictive models to aid in the underwriting process. United Guaranty Residential Insurance Co. collaborated with IBM Corp. to develop an expert system that could render underwriting decisions in less than 10 seconds, and Stewart Title began a similar electronic document preparation service as well as a flood determination company.

Despite their use of computer technology, the title insurance industry was finding it much more difficult to streamline the records search process using computers and automation. Except for major metropolitan areas, most county governments charged with collecting title records were still maintaining them just as they did 100 years ago, according to Chicago Title. Although checking the ownership of a parcel of land was a straightforward process, in order to ensure the validity of title for a buyer, title insurance companies had to also track prior owners of the land and determine if the land had any easements, liens, or other encumbrances. Title insurance companies were limited in that they could be only as efficient as the county in which the records were kept. For most counties, there was only a limited amount of information maintained in a computerized database, and this information was typically indexed in only one way, usually either by seller or buyer. Rarely were property records indexed by legal description, address, or type of document. This significantly hampered the investigation required to under-write a policy of title insurance.

Wikipedia
title insurance
Title insurance is insurance against loss from defects in title to real property and from the invalidity or unenforceability of mortgage liens. It is available in many countries but it is principally a product developed and sold in the United States. It is meant to protect an owner's or lender's financial interest in real property against loss due to title defects, liens or other matters. It will defend against a lawsuit attacking the title as it is insured, or reimburse the insured for the actual monetary loss incurred, up to the dollar amount of insurance provided by the policy.

Typically the real property interests insured are fee simple ownership or a mortgage. However, title insurance can be purchased to insure any interest in real property, including an easement, lease or life estate. Just as lenders require fire insurance and other types of insurance coverage to protect their investment, nearly all institutional lenders also require title insurance to protect their interest in the collateral of loans secured by real estate. Some mortgage lenders, especially non-institutional lenders, may not require title insurance.

The following focuses on title insurance as issued in the United States.


Why Title Insurance Exists in the United States
Title insurance exists in the US in great part because of a comparative deficiency in the US land records laws. Most of the industrialized world uses land registration systems for the transfer of land titles or interests in them. Under these systems, the government makes the determination of title ownership and encumbrances on the title based on the registration of the instruments transferring or otherwise affecting the title in the applicable government office. With only a few exceptions, the government's determination is conclusive. Governmental errors lead to monetary compensation to the person damaged by the error but that aggrieved party usually cannot recover the property.

A few jurisdictions in the United States have adopted a form of this system, e.g., Minneapolis, Minnesota and Boston, Massachusetts. However, for the most part, the states have opted for a system of document recording in which no governmental official makes any determination of who owns the title or whether the instruments transferring it are valid. The reason for this is probably that it is much less expensive to operate than a land registration system; it doesn't require the number of legally skilled employees that the registration systems do.

Greatly simplified, in the recording system, each time a land title transaction takes place, the transfer instrument is recorded with a local government recorder located in the jurisdiction (usually the county) where the land lies. The instrument is then indexed by the names of the grantor (transferor) and the grantee (transferee) and photographed so it can be found and examined by anyone who wants to see it. Usually, the failure by the grantee to record the transfer instrument voids it as to subsequent purchasers of the property who don't actually know of its existence.

Under this system, determining who owns the title requires the examination of the indexes in the recorders' offices pursuant to various rules established by state legislatures and courts, scrutinizing the instruments to which they refer and making the determination of how they affect the title under applicable law. (The final arbiters of title matters are the courts, which make decisions in suits brought by parties having disagreements.) Initially, this was done by hiring an abstractor to search for the documents affecting the land in question and an attorney to opine on their meaning under the law, and this is still done in some places. However, this procedure has been found to be cumbersome and inefficient in most of the US. Substantial errors made by the abstractor or the attorney will be compensated only to the limit of the financial responsibility of these parties (including their liability insurance). The opinions given by attorneys as to each title are not uniform and often require time consuming analysis to determine their meanings.

Title insurers utilize this recording system to produce an insurance policy for any purchaser of land, or interest in it, or mortgage lender if the premium is paid. Title insurers use their employees or agents to perform the necessary searches of the recorders' offices records and to make the determinations of who owns the title and to what interests it is subject. The policies are fairly uniform (a fact that greatly pleases lenders and others in the real estate business) and the insurers carry, at a minimum, the financial reserves required by insurance regulation to compensate their insureds for valid claims they make under the policies. This is especially important in large commercial real estate transactions where many millions of dollars are invested or loaned in reliance on the validity of real estate titles. As stated above, the policies also require the insurers to pay for the costs of defense of their insureds in legal contests over what they have insured. Abstractors and attorneys have no such obligation.


Comparison with other insurance
Title insurance differs in several respects from other types of insurance. Where most insurance is a contract where the insurer indemnifies or guarantees another party against a possible specific type of loss (such as an accident or death) at a future date, title insurance generally insures against losses caused by title problems that have their source in past events. This often results in the curing of title defects or the elimination of adverse interests from the title before a transaction takes place. Title insurance companies attempt to achieve this by searching public records to develop and document the chain of title and to detect known claims against or defects in the title to the subject property. If liens or encumbrances are found, the insurer may require that steps be taken to eliminate them (for example, obtaining a release of an old mortgage or deed of trust that has been paid off, or requiring the payoff) before issuing the title policy. In the alternative, it may "except" those items not eliminated from coverage. Title plants are sometimes maintained to index the public records geographically, with the goal of increasing searching efficiency and reducing claims.

The explanation above discloses another difference between title insurance and other types: title insurance premiums are not principally calculated on the basis of actuarial science, as is true in most other types of insurance. Instead of correlating the probability of losses with their projected costs, title insurance seeks to eliminate the source of the losses through the use of the recording system (see Recording (real estate)) and other underwriting practices. As a result, a relatively small fraction of title insurance premiums are used to pay insured losses. The great majority of the premiums are used to finance the title research on each piece of property and to maintain the title plants used to efficiently do that research. There is significant social utility in this approach as the result conforms with the expectations of most property purchasers and mortgage lenders. Generally, they want the real estate they purchased or loaned money on to have the title condition they expected when they entered the transaction, rather than money compensation and litigation over unexpected defects.


Types of policies
Standardized forms of title insurance exist for owners and lenders. The lender's policies include a form specifically for construction loans, though this is rarely used today.


Owner's policy
The owner's policy insures a purchaser that the title to the property is vested in that purchaser and that it is free from all defects, liens and encumbrances except those which are listed as exceptions in the policy or are excluded from the scope of the policy's coverage. It also covers losses and damages suffered if the title is unmarketable [1] The policy also provides coverage for loss if there is no right of access to the land. Although these are the basic coverages, expanded forms of residential owner's policy exist that cover additional items of loss.[2]

The liability limit of the owner's policy is typically the purchase price paid for the property. As with other types of insurance, coverages can also be added or deleted with an endorsement. There are many forms of standard endorsements to cover a variety of common issues. The premium for the policy may be paid by the seller or buyer as the parties agree; usually there is a custom in a particular state or county on this matter which is reflected in most local real estate contracts. Consumers should inquire about the cost of title insurance before signing a real estate contract which provide that they pay for title charges. A real estate attorney, broker, escrow officer (in the western states), or loan officer can provide detailed information to the consumer as to the price of title search and insurance before the real estate contract is signed. Title insurance coverage lasts as long as the insured retains an interest in the land insured and typically no additional premium is paid after the policy is issued.


Lender's policy
This is sometimes called a loan policy and it is issued only to mortgage lenders. Generally speaking, it follows the assignment of the mortgage loan, meaning that the policy benefits the purchaser of the loan if the loan is sold. For this reason, these policies greatly facilitate the sale of mortgages into the secondary market. That market is made up of high volume purchasers such as Fannie Mae and the Federal Home Loan Mortgage Corporation as well as private institutions.

The American Land Title Association ("ALTA") forms are almost universally used in the country though they have been modified in some states. In general, the basic elements of insurance they provide to the lender cover losses from the following matters:

1. The title to the property on which the mortgage is being made is either

• Not in the mortgage loan borrower,
• Subject to defects, liens or encumbrances, or
• Unmarketable.
2. There is no right of access to the land.

3. The lien created by the mortgage:

• is invalid or unenforceable,
• is not prior to any other lien existing on the property on the date the policy is written, or
• is subject to mechanic's liens under certain circumstances.
As with all of the ALTA forms, the policy also covers the cost of defending insured matters against attack.

Elements 1 and 2 are important to the lender because they cover its expectations of the title it will receive if it must foreclose its mortgage. Element 3 covers matters that will interfere with its foreclosure.

Of course, all of the policies except or exclude certain matters and are subject to various conditions.

There are also ALTA mortgage policies covering single or one-to-four family housing mortgages. These cover the elements of loss listed above plus others. Examples of the other coverages are loss from forged releases of the mortgage and loss resulting from encroachments of improvements on adjoining land onto the mortgaged property when the improvements are constructed after the loan is made.


Construction loan policy
In many states, separate policies exist for construction loans. Title insurance for construction loans require a Date Down endorsement which recognizes that the insured amount for the property has increased due to construction funds that have been vested into the property.


Land title associations
In the United States, the American Land Title Association (ALTA) is a national trade association of title insurers. ALTA has created standard forms of title insurance policy "jackets" (standard terms and conditions) for Owner's, Lender's and Construction Loan policies. ALTA forms are used in most, but not all, U.S. states. ALTA also offers special endorsement forms for the various policies; endorsements amend and typically broaden the coverage given under a basic title insurance policy. ALTA does not issue title insurance; they provide the policy forms that title insurers issue.

Some states, including Texas and New York, may mandate the use of forms of title insurance policy jackets and endorsements approved by the state insurance commissioner for properties located in those jurisdictions, but these forms are usually similar or identical to ALTA forms.

While title insurance generally insures owners and lenders against things that have occurred in the past, in some limited circumstances, in some states, coverage is available for certain events that can occur after a title insurance policy is issued. Most notably, coverage is now available that includes the risk that a third party may place a forged mortgage or deed of trust against a property after the owner's policy has been issued. This coverage is included in the "Homeowners Policy of Title Insurance" (a specific policy form), published by ALTA and the California Land Title Association (CLTA). Note that this is not the same as a so-called CLTA Standard Policy, which provides much less coverage than the Homeowners Policy of Title Insurance.


Industry profitability
The title insurance industry is a profitable one. In 2003, according to ALTA, the industry paid out about $662 million in claims, about 4.3% percent of the $15.7 billion taken in as premiums. By comparison, the boiler insurance industry, which like title insurance requires an emphasis on inspections and risk analysis, pays 25% of its premiums in claims.

Comparing claims with premiums tells only part of the story, because, for example, title insurance companies have marketing expenses not incurred by the boiler insurance industry. Also, the boiler insurance inspections do not provide the certainty of risk level that the recording laws provide for title insurers. But the industry's profitability is also hinted at by the repeated instances of state regulators uncovering cases where title insurers have engaged in illegal marketing tactics. Although owners are free to shop around for title insurance, many owners defer such decisions to lenders or real estate agents, and title insurance companies have sometimes used illegal tactics in marketing to those decision-makers. Illegal tactics noted in a CNN/Money article include kickbacks, free vacations, and the free use of office space and equipment. The article noted that in 2005 alone over a dozen title insurers settled with regulators for tens of millions of dollars over these practices.

Further evidence of the industry's profitability can be found by comparing the title insurance costs in the 49 states where such insurance is issued with the costs associated with the state-run Title Guaranty Program in Iowa, where title insurance is illegal. The program is run by the Iowa Finance Authority. It costs $110 for up to $500,000 in coverage in the state; after adding costs for the services of an abstractor (who does the research on the property) and the legal fees, such a title guaranty costs about $400.00, versus the $1,100.00 paid for that same home in other states (based on figures cited by the Iowa Bar Association).

In many states, the price of title insurance is regulated by a state Insurance Commissioner. In these states, such as Florida, the rate for the insurance premium cannot be controlled by the industry. Unlike other forms of insurance such as life, medical or home owners; title insurance is not paid for annually, it has one payment for the term of the policy, which is in effect until the property is resold.


Notes
^ A title is unmarketable if it would be unacceptable to a reasonable purchaser exercising reasonable business prudence, who is informed of the facts creating or affecting it and their legal meaning, because it appears subject to material defect, grave doubt or to the likelihood of litigation. However, the title need not be bad in fact to be "unmarketable." Black's Law Dictionary 4th Ed. West Publishing Co. 1951) defining "Marketable Title" and "Unmarketable Title."
^ Examples are the American Land Title Association Residential Owner's Policy and Expanded Coverage Residential Owner's Policy.



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Answer 2

(m)

Title insurance is insurance against loss from defects in title to real property and from the invalidity or unenforceability of mortgage liens. It is available in many countries but it is principally a product developed and sold in the United States. It is meant to protect an owner's or lender's financial interest in real property against loss due to title defects, liens or other matters. It will defend against a lawsuit attacking the title as it is insured, or reimburse the insured for the actual monetary loss incurred, up to the dollar amount of insurance provided by the policy.

Typically the real property interests insured are fee simple ownership or a mortgage. However, title insurance can be purchased to insure any interest in real property, including an easement, lease or life estate. Just as lenders require fire insurance and other types of insurance coverage to protect their investment, nearly all institutional lenders also require title insurance to protect their interest in the collateral of loans secured by real estate. Some mortgage lenders, especially non-institutional lenders, may not require title insurance.

Answer 3

Title Insurance guarantees to indemnify an owner or mortgagee of property for damages suffered as a result of undiscovered title defects which arise later.

Answer 4

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RE What is Title insurance?

What is it for? any advantages? how will it benefit me?

Answer 5

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RE :What is Title insurance?
What is it for? any advantages? how will it benefit me?
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Answer 6

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Answer 7

It is to cover making sure that there are no valid claims to the property, or leins on the property.