When you purchase a home, you're buying more than the house and the land it sits on. You are also buying the property's ownership history, called the "chain of title". If there is a problem with the chain of title, you own the problem in addition to your home. "Defect" or "cloud on" are terms used to describe a problem with the chain of title. Although the sellers may be obligated to help you cure the title, they may not be available or solvent.
Title insurance protects from losses resulting from defects in the title of real property. Title insurance companies research and evaluate the history of a property to make certain that there is nothing in the property's history tat could result in a loss to the insured.
There are two types of title insurance, lenders title insurance and owners title insurance. Most lenders require the purchase of lenders title insurance when they issue a loan. It is based on the dollar amount of the loan and protects the lender's interest in the property against title problems. Lenders title insurance protects only the lender's interest in the property, not the owner's. To have title protection, owners must purchase a separate policy, called an Owners Policy, that insures their interests.
Attorney Robert R. Howard, III is an agent for CATIC® the largest Bar-Related® title insurance underwriter in the United States.