Oct
Title insurance is basically an insurance against the defects in the title deed of a property that can cause the owner financial loss as well as mental agony. These defects could either be from a legal point of view where-in you might end up having a different owner as against the person from whom you bought the property, or else unenforceable mortgage liens that exist on the title deed. The requirement for such title insurances came into existence basically because of the comparative deficiency of land record laws. This made it necessary for buyers to protect themselves from any losses and ensure that they are compensated in case of such an occurrence.
The basic aim of title insurance is to defend the insured against any lawsuits or compensate the insured person for the monetary loss occurred. The first title insurance company, the Law Property Assurance and Trust Society, was formed in Pennsylvania in 1853. Earlier, the buyer had to bear the absolute responsibility of making sure that the property he has bought has perfect title deeds, without any complications, what so ever. This led to extensive research before any purchase as the buyer had to rummage through the various government and registrar offices to cross check on title deeds and their authenticity. This was a cumbersome process and this is what led to insurance companies starting the title insurance process. Here, insurance companies allow you to take policies, for which premiums are paid by the insured person, and in return the company shall bear the headache of ensuring that the title deed that you possess is authentic. They have tie ups with title inspection companies who take care of the verification process and ensure that all is well.
There are three types of title insurance policies. These are the Owner’s policy, the lender’s policy and the construction loan policy. As the name suggests, these policies service different aspects of the purchase. While the owner’s policy takes care of the owner’s risks related to the title deed, the lender’s policy is basically to cover the mortgage loan. It is more or less like loan insurance but covers the risks associated with the title deed. Lender’s policy facilitates sale of mortgage loans in the open market and is concerned with high volume transactions. Constriction loan policy covers the title deed for homes that are to be constructed. Title insurance for construction loans requires a Date Down endorsement which recognizes that the insured amount for the property has increased due to construction funds that have been vested into the property. Though title insurance is actually a cover for the deficiency associated with the land record laws, it is still a great tool to protect yourself from the frauds associated with title deed documentation and related transactions.