A Title Insurance policy is a contract of indemnity between the insurance company and the owner of an interest in real property.
Typically the real property interests insured are fee simple ownership or a mortgage. However, title insurance can be purchased to insure any interest in real property including easements, leases, and life estates.
Title Insurance is different than most other types of insurance. Where most insurance is the contractual “coverage” where one party indemnifies or guarantees another party against a possible specific type of loss (such as an accident or death) at a future date, title insurance attempts to detect, prevent, and eliminate risks and losses caused by title problems which have their source in past events. Title companies attempt to achieve this by searching public records to develop and document the chain of title and to detect whether there are any adverse claims on the subject property. Any issues found are either fixed before issuing the policy or the coverage is specifically written to exclude those items.
Just as lenders require hazard insurance and other types of insurance coverage to protect their investment, most lien lenders will also require title insurance as security for their investment in real estate.
There are two basic kinds of title insurance:
Owner’s Policy: The owner’s policy insures a purchaser that the title to the property is free from defects or encumbrances, except any listed as exceptions in the policy. It covers losses and damages suffered if the title is unmarketable (i.e., if the title can not be legally sold and conveyed to another party), if the property is found to belong to someone else, if there is no access to the land, or if there is some defect or lien on the title. An owner’s policy will specifically list what is covered as of what effective date. The policy will also contain various standard exclusions to coverage and also specific exceptions to title that the title company is unwilling to insure. Title insurance coverage lasts as long as the insured retains an interest in the land and typically no additional premium is paid after the policy is issued.
Lender’s Policy: In addition to the coverage provided on the owner’s policy, this type of policy also insures the validity and enforceability of the lien of the lender’s mortgage or deed of trust. The lender’s policy protects the lender for the amount of their loan.
Cygneture Title Solutions LLC
13021 Evergreen Drive
Baxter, MN 56425
Fax: 218-828-087 3