The Owner’s Policy or Lender’s Policy protects, as of the date of the recording of the instrument whether a deed or a mortgage, against any weak link in the chain of title that could emerge to cause headaches. Some headaches are simple things like unpaid real estate taxes or other liens, improperly recorded instruments, inadequate legal descriptions, or improper vesting on transferring documents. More complicated headaches are things like forged documents or releases, wild deeds, interests of a deceased that were not probated, or undisclosed heirs.
Title insurance covers the Buyer, the Lender, or both, depending on the type of policy issued, for any claims or legal fees that may arise out of the weak link in the chain of title. In a mortgage transaction, the Lender’s Policy protects the lender up to the amount of the insurance purchased, normally in the amount loaned. In a purchase and sale transaction, the Owner’s Policy protects the Buyer up to the amount of the insurance purchased, usually the purchase price of the property.
Title insurance is an indemnification policy; it protects against loss. If the Buyer does not receive an Owner’s Policy, then the Buyer is not protected, if only a Lender’s Policy was purchased. The Lender’s Policy only covers the lender’s loss.
With a few noted exceptions, title insurance only protects against weak links in the chain that arose prior to the date of the issuance of the policy. The policy extends backwards in time for an indefinite period, from the date the policy was issued. This concept is in contract to such insurances such as hazard, casualty or life insurance, which insure on a forward basis and sometime only for a specific period.
Protection under your title policy may terminate if you transfer the property to another party, in some cases even if it is a wholly owned subsidiary or beneficiary interest. The Owner’s Policy will last as long as the owner or their heirs have an interest in the property, however once the interest is severed, the protection ends.
Stay tuned for the next article: “What does title insurance not protect? What you need to ask for in order to be fully protected.”
For more information, contact our firm today (813) 528-4044 or visit our website: http://www.brownlawandtitle.com
Barbara Brown, PA