YOU ASK:

What does title insurance protect against?

WE ANSWER:

Title insurance protects you against financial loss due to claims against defects in a title for the property you own.

There are basically two major kinds of title insurance - owner's title insurance and lender's title insurance. The owner's title insurance protects you against losses you may personally incur while the lender's title insurance protects the lender or financial institution that granted you a mortgage or a loan for your property.

Your title may have some discrepancies or clouds that can endanger your rights towards the ownership of the property. These are covered by your title insurance so that you are able to mount a defense against any claims or you can be recompensed for covered losses related to your title.

The title insurance will cover:

  • Legal costs that you spent in order to defend against covered causes regarding your title ownership
  • Financial losses caused by claims on your title
  • Compensation/indemnity if the claim against your title is successful and you lose the title (the coverage is only up to the face value of the policy

The things against which title insurance protects you may include:

  • Legal instruments executed with the use of expired, revoked or fake powers of attorney
  • Acts of fraud such as:
    • False impersonation of the real land owner
    • Forged deeds, wills, mortgages or releases of mortgages, and other instruments
    • False representation of civil status
    • False affidavits of heirship or death
  • Inaccurate recording of legal documents, particularly the legal description of the lot
  • Unknown or undisclosed heirs that suddenly appear to stake a claim on the property. This may include heirs that are missing at the time of the transaction
  • Failure to include concerned parties (children, the spouse, other heirs) in certain judicial proceedings
  • Liens due to unpaid taxes and bills
  • Gaps or clouds in the chain title
  • Deeds performed by persons who do not have legal capacity (minors, those with unsound mind, foreigners, etc)
  • Mistakes in tax records
  • Divorced parties and the rights of each divorced spouse to the property
  • Violations of public policy (including zoning laws and building codes)
  • Claims by creditors
  • Unlawful possession or taking of the property by condemnation or eminent domain
  • Forfeiture of property because of criminal acts

There are also some exclusions on the coverage. These may include:

  • Appropriation of condemned land
  • Unrecorded and unknown title defects, particularly those that occur after the real estate transaction was closed or finalized
  • Zoning ordinance or building code violations
  • Overlapping movements, encroachment or any discrepancies with regards to the shortage of the area of the property
  • Right of usage claim for properties that are near a water body
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