Understanding Title Insurance In Depth

The purchase of a home is one of the most expensive and important purchases you will ever make. You and your mortgage lender will want to make sure the property is indeed yours and that no one else has any lien, claim, or encumbrance on your property. Title insurance provides this assurance.

Title insurers work to identify and eliminate risk before issuing a title insurance policy. Casualty insurers — auto, fire, health — assume risk and collect premiums to pay for expected losses. Title companies work differently. Title insurance indemnifies you against loss under the terms of your policy, but title companies work in advance to identify and eliminate potential risks, preventing losses caused by title defects created in the past. The greatest part of the title insurance premium goes toward risk elimination — maintaining title plants, searching, and examining title records reaching back many years.

Title companies routinely issue two types of policies: an 'owner's' policy which insures the homebuyer for as long as they and their heirs own the home, and a 'lender's' policy which insures the priority of the lender's security interest over the claims that others may have in the property.

A title insurance policy contains provisions for the payment of legal fees in defense of a claim against your property covered under your policy. It also contains provisions for indemnification against losses from a covered claim. A premium is paid at close — there are no continuing premiums due, as there are with other types of insurance.

You may wonder: what if I'm buying property from someone I know? You may not know the owner as well as you think. People undergo changes in their personal lives that may affect title to their property — divorces, will changes, transactions that limit property use, and liens placed against them for various reasons. There may also be matters affecting the property that aren't obvious or known, even by the existing owner, which a title search seeks to uncover.

Matt Goeglein and Xavier de la Piedra IV at Fidelity National Title personally oversee the title examination process on every transaction in the South Bay and Westside LA, ensuring that hidden risks are identified and resolved before they can affect your closing.