What does title insurance guarantee?


Basically, title insurance guarantees that you have a clean title.

This means that:

  • There are no liens attached to the property.
  • The property is not in danger of being claimed by someone else. This may happen when someone who had interest in the property claims that the transfer of the ownership is illegal. (i.e. the signature of the owner was forged, the deed was misinterpreted, the legal definition of the property was inaccurate, etc.)
  • Legal fees you incur to mount a defense on a claim is paid.
  • Structural damage (i.e. you had to tear down your garage) due to a defect in the title is properly compensated.

Title insurance guarantees protection against unknown interests to your property and claims of ownership that may crop up in the future.

How does title insurance do that?

The insurance does this by first doing a title search on the property to see that all legal matters related to the transfer of ownership are all done properly. The search will look into mortgages, deeds, tax declarations and documents, birth certificates, marriage certificates, liens and so on in an effort to prove that there are no clouds in the title.

Owner's title insurance guarantees the protection of the homeowner's interest while lenders' title insurance guarantees the protection of the lender's interests.

Mind you, title insurance will only cover past defects - unknown problems that happened before the policy was made effective. It will not guarantee protection against future defects - such as future liens placed on the house and future debts incurred related to the house.

The title insurance is also guaranteed to provide the coverage for as long as the insured or his heirs remain the owners of the property. Once the property is sold and ownership is transferred to another party, that title insurance ceases to become effective.

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