TITLE INSURANCE INFORMATION

The two most common types of title insurance policies are as follows:

1. Lender's Title Insurance:
   Lender's Title Insurance protects the lender's investment in the property. This policy insures, among other things, that the person(s) mortgaging the real estate are the true owners, and also, unless otherwise stated therein, insures the lender's position as first lien holder on the real estate. The policy provides a mortgage lender with a high degree of safety against the loss of security as a result of a title problem. This protection remains in effect for as long as the mortgage remains unsatisfied. A Lender's Title Insurance Policy, however, does not offer any protection to the owner of the real estate.
2. Owner's Title Insurance:
   Owner's Title Insurance provides protection against serious financial loss due to a defect in the title to the property purchased. Unlike other insurance policies, title insurance has a single one-time premium, typically paid at closing. Owner's policies cover both claims arising out of title problems that could have been discovered in the public records, and those "hidden hazards" which even the most exhaustive title search could not have uncovered. If a title claim is made against the property, the Company will pay costs & legal expenses for defending against any lawsuit attacking the title, and will either clear up the problems or pay the insured's losses.

At the present time, the title insurance industry offers two levels of Owner's Title Insurance protection. The standard Owner's Policy, an ALTA 92 policy, offers buyers a level of protection against numerous title defects & hazards, while the Enhanced Owner's Policy, an ALTA 98 policy, provides more expansive coverage, including covering matters of survey on insured residential property without the cost of a survey.

To protect possibly the most important investment you'll ever make - the investment in real estate. (Click here to read about the cost of Owner's Title Insurance for a cash purchase.)

A lender goes to great lengths to minimize the risk of lending money for the purchase of real estate. First, credit is checked as an indication of the borrower's ability to repay the loan.

Then, the lender seeks the assurance that the quality of the title to the property to be acquired and which will be pledged as security for the loan is satisfactory. The lender does this by obtaining a loan policy of title insurance.

The loan policy protects the lender against loss due to unknown title defects. It also protects the lender's interest from certain matters which may exist, but may not be known at the sale. (Click here to read about the cost of Owner's Title Insurance for a purchase involving a lender.)

But, this policy only protects the lender's interests. It does not protect the borrower. That is why a real estate purchaser needs an owner's policy, which can be issued at the same time as the loan policy, usually for a nominal one-time fee.

If the lender has title insurance protection and the owner does not, what possible danger of loss exists? (Click here to read about true title problems that have occurred in Jefferson County, Indiana.)

An example, assume real estate was purchased for $100,000. A down payment of $20,000 is made, and a lender holds an $80,000 mortgage lien, or beneficial interest. The lender acquires title insurance protecting the lender's interest up to $80,000. But the purchaser's down payment of $20,000 is not covered.

What if some matter arises affecting the past ownership of the property? The title insurance company would defend and protect the interest of the lender. The purchaser, however, would have to assume the financial burden of his or her legal defense. If the defense is not successful, the result could be a total loss of title

The title insurance company pays the lender's loss and is entitled to take an assignment of the borrower's debt. The purchaser loses the down payment, other equity in the property that may have accumulated and the property. And the balance on the note is still due!