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WHAT IS TITLE? (cont’d)
CHICAGO TITLE CALIFORNIA BUYER & SELLER GUIDE
What Types of Policies Are There?
Protection against flaws and other claims is provided by the title insurance policy which is issued after your transaction is complete. Two types of policies are routinely issued at this time: an “owner’s policy” which covers the home buyer for the full amount paid for the property; and a “lender’s policy” which covers the lending institution over the life of the loan. When purchased at the same time, a substantial discount is given in the combined cost of the two policies. Unlike other forms of insurance, the title in- surance policy requires only one moderate premium for a policy to protect you or your heirs for as long as you own the property. There are no renewal premiums or expiration dates.
How is Title Insurance Different Than Other Types of Insurance?
With other types of casualty insurance, such as auto, home, health, and life, a person thinks of insur- ance in terms of future loss due to the occurrence of some future event. For instance, a party obtains automobile insurance in order to pay for future loss occasioned by a future “fender bender” or theft of the car. Title insurance is a unique form of insurance which provides coverage for future claims or losses due to title defects which are created by some past event (i.e. events prior to the acquisition of the property).
Another difference is that most other types of insurance charge ongoing fees (premiums) for continued coverage. With title insurance, the original premium is the only cost as long as the owner or heirs own the property. There are no annual payments to keep the Owner’s Title Insurance Policy in force. While some people balk at another “closing fee,” title insurance is pretty reasonable considering the policy could last a lifetime.
How Does a Title Insurance Policy Protect Against Claims?
If a claim is made against the owner or lender, the title insurance company protects the insured by:
• Providing an attorney to defend the owner/lender, at no cost to the owner/lender, if a lawsuit is filed that challenges the title to the property based on a matter that is insured by the policy, and indemnifying the owner/lender for losses provided under the policy if the owner/lender is unsuccessful in that lawsuit.
Each policy is a contract of “indemnity.” The policy covers the costs and fees for legal defense of title for any defect covered under the policy’s terms and indemnifies for certain losses up to the policy limits.
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