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The concept of title insurance
By | December 22, 2007
A policy of title insurance is designed so that the owner of the property is safeguarded from problems that may arise from the title of the property being defective or some other such problem. Property may have had several previous owners and have been through many transactions and there could be numerous problems such as unpaid liens or illegal contracts, forged signatures or unpaid taxes on the property. Therefore the purpose of title insurance is so that a good title free from all encumbrances passes to the policy holder. It is meant to protect the owner or lender’s interest in the property against losses arising out of title defects, liens etc. It will protect the property from a lawsuit or provide reimbursement to the insured up to the amount of the policy in case of a loss arising to the policy holder. Although the concept is present in other countries like Canada, The United Kingdom, China, Mexico, Korea etc it is most prevalent in the United States. There are primarily two kinds of title deeds: owner’s policy & Lender’s policy.
Owner’s policy:
Such a kind of policy vests the title of the property with the purchaser and guarantees that it is free from all defects, liens and other kinds of encumbrances and also covers losses that might arise from unmarketability of the title.
Lender’s policy:
This kind of policy is also known as a loan policy and it is transferred along with the assignment of the mortgage loan. Thus the policy benefits the purchaser of the loan if the loan is sold and that it allows the sale of the mortgage into the secondary market.
Construction loan policy:
Special policies for construction loans are also available and they require a down date endorsement while recognizes that the value of the property has increased due to more funds having been invested in the construction property.
Thus title insurance is imperative for land owners and lenders in order to safeguard them from defects in title or any other encumbrance that may arise and cause losses and damage to them.
Topics: Title Insurance |
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