 Title
Insurance - An Overview
By John T. Lotardo aka
the “TITLEMAN”™
An introduction:
What is Title
Insurance anyway?
Title Insurance is a contract
between the title insurer
and the insured whereby
the insurer agrees to
indemnify the insured
for a specific amount
against losses for specified
types of title defects
for real property which
the insured has an interest.
Is it the same
as other types of insurance?
Title insurance
is quite different from
other types of insurance
policies. A title policy,
unlike property or casualty
insurance, is based upon
the theory of risk elimination.
The large expense of retrieving,
storing, and examining
the official records which
affect real property is
evidence of risk elimination.
Other insurance policies
are based upon a theory
of risk assumption. These
types of insurance policies
pool the premiums collected
on the assumption that
risk has been assumed
by the insured and to
insure against that unpredictable
future event. Title insurance,
on the other hand, is
issued after spending
considerable time and
resources in order to
reduce the likelihood
of a loss.
The premiums charged
are also another difference
between title insurance
and other types of insurance.
A title insurance premium
is generally a one-time
premium. The premium is
paid at the time the real
estate transaction closes.
For property, casualty,
and medical insurance,
for example, payments
are made in regular renewal
premiums.
Another difference is
the manner of coverage.
Title insurance is generally
backward looking, while
other types of insurance
are forward looking. That
is to say, title insurance
insures the condition
of title of the real property
at the time the real estate
transaction closes. It
insures the condition
of title up to
the date of the policy.
Homeowners insurance,
however, covers the insured
for a future event
(a fire or theft for example).
At times, especially with
some of the new forms
of policies being made
available, title insurance
comes close to resembling
other types of insurance
but still is not the same.
An example is when a claim
is made sometime after
the real estate transaction
closes. The insurer generally
has a duty to defend so
long as the policy is
still in force. However,
this duty is only to defend
the insured for the condition
of the title represented
on the date of the policy.
(For a detailed explanation
of how a claim is handled,
please see the article,
"How to Make and
Perfect a Claim."
Types of title
policies: A Smorgasbord
of coverage
There are several varieties
of title policies that
are available.
The policy issued will
depend upon:
1) the type of real
estate to be insured;
2) the type of interest
to be insured; and
3) the condition of the
title.
To learn more about Commonly
issued title policies
Click here.
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