To understand title insurance, it helps to know what is meant by "title". Title is simply the evidence that the owner of real estate is in fact in lawful possession of the property. Title insurance is protection against property loss or damage due to defects in the title to the property.
There are generally two kinds of title insurance - owners and lenders. Mortgage lenders will always require you to obtain evidence of title and purchase title insurance as part of making the loan. This protects the mortgage company or bank from losing priority of their mortgage if there are any title defects. A lender's title insurance policy does not protect the owner in the event of a title defect. However, owners can opt to purchase an owner's title insurance policy, often at a low rate when added to the lender's policy, to protect their interest.
The title insurance process begins with an attorney searching property records to determine easements, mortgages, and liens of record as well as constructing a chain of title and checking to be sure there aren't any errors, omissions, or mistakes. The attorney or title insurance company will then work with an underwriter to issue the insurance policy. After the closing on the property has been completed according to the title company's instructions, the insurance policy is issued. If there are any issues with the title, a claim can be made under the policy and the insurance policy will pay to defend the insured's interest in the title to the property.
The attorneys at Ward & Oehler, Ltd. regularly conduct title examinations on behalf of owners and lenders.
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