What is title insurance and what are the different kinds that you can get? Lets take a look at what you need to know.

We all know that insurance in general is designed to protect us when something bad happens. Title insurance is no different. In this case, title insurance I designed to protect a real property owner or a lender for certain types of loss that effect the title or marketability of a home.

So what does that really mean anyway? Well, many things can effect the title to property. During the escrow process, an abstract or summary of the title of a property gets reviewed. What that means is that every document ever recorded regarding that property gets listed on the abstract/summary. However, this summary of the homes past paperwork does not reveal things like forged paperwork, spousal interests, incapacity of parties, illegal contracts, etc. So, this insurance is designed to provide protection in the event that any of the problems are discovered after the home is purchased.

So for instance, if you buy a home and you get title insurance and it is discovered that you do not have title because that last person who signed the contact to sell the home was not of legal age to do so, you are covered for that potential loss by the title insurance.

Title insurance is paid for once, at the time of purchase and remains in effect until the home is sold again.

There are several types of title insurance, they are:

• Standard Policy or CLTA Policy. This is the most common type of title insurance. It covers buyers as to matters of record and specified risks. So what does that mean in plain english? Well, it would cover things like forgery, lack of capacity of grantor (person selling the land), undisclosed interests, failure of delivery of prior deed, federal estate tax liens, corporate deeds that have expired. It does NOT cover things like things you knew about but did not disclose, zoning issues, etc.
• ALTA Policy or Extended Policy. It covers everything the CLTA does, but also covers unrecorded liens, off-record easements, rights of parties in physical possession, rights and claims that a correct survey or physical inspection would disclose, mining claims, water rights, lack of access. While this policy does cover much more, there are some items it does not cover, such as matters known by insured by not disclosed, government regulations such as zoning, liens placed by insured, eminent domain and violations of the map act. 
  

 Who pays for title insurance is really a matter of custom depending on where you live. 

While title problems are relatively rare, when it comes to protecting your interests in the single largest investment of your life, title insurance is a must. 

Source:Californai Real Estate Practice, Fourth Edition. Anderson, Otto, Pivar