Title Insurance
Risk Prevention vs. Risk Assumption
Title insurance protects the parties involved in real estate transactions. Unlike traditional types of insurance which is based on assuming risk, title insurance is based on reducing and preventing risks. The goal of title insurance is to eliminate all known risks before the closing.
Title insurance provides:
- Losses associated with valid claims
- Expenses incurred when defending against claims.
Owner's Policy
The amount of an owner's policy is generally equal to the purchase price. The owner's policy covers claims for as long as the insured, or their heirs, retains an interest in the insured property. Notably, owners should be aware that their interests are not protected or covered under the lender's policy.
Lender's Policy
The lender's policy ensures the lender that their loan will take priority against all other matters affecting title and that the loan is enforceable. The amount of a lender's policy is generally the amount of the loan. As the balance of the loan decreases, the liability decreases.