When buying their home, many new homeowners purchase title insurance without thinking about it much.
In fact, when the home is financed, the lender may insist on a title insurance policy. Buyers may just chalk up title insurance as part of the cost of procuring a mortgage.
Title insurance is a bit different than other types of insurance. One big difference is that usually the policyholder will pay one premium at the time of the sale instead of paying premiums over time. Likewise, the terms of the policy are fixed. Coverages do not change over time.
Title insurance protects the policyholder’s title, that is, their legal rights to the land as it was sold to them.
It does not protect the home or building itself, nor does it protect the policyholder from liability claims that do not pertain to title, like a slip-and-fall case for example. A person would need a separate homeowner’s policy for this type of coverage.
In other quarters of the insurance world, carriers expect to pay claims from time to time. This is less so the case in title insurance.
Before issuing a policy, an insurance carrier or their agent will carefully examine the history of the property and identify any possible legal disputes over title.
The carrier will then exclude these known issues from coverage. Several other standard exclusions also apply.
If there is a problem with the policyholder’s title, or a title defect, and the defect is covered, then the insurance carrier must either resolve the problem or pay an amount up to the limits on the policy.
How might title insurance benefit me down the road?
It is surprising how many properties in the greater Bay Area have issues related to title.
Aside from more obvious problems like easements, improper or conflicting descriptions, tax liens and the like, surprise defects may emerge from unpaid for construction on a property or even a divorce or seemingly unrelated legal dispute.
These stressful situations could in the worst case mean a person loses their entire investment in their real estate and may be forced to move.
Residents of Northern California should explore whether title insurance might help them resolve these issues.
They may also need help pursuing any claim with their insurance carrier. Carriers may dispute that they must respond to a claim, sometimes without good cause.