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Your Guide to Title Insurance in Texas
What Is Title Insurance?
Title insurance is the application of the general
principles of insurance to real estate titles.
But, unlike other types of insurance, which protect the
insured against loss due to unexpected future events, title insurance
protects against loss, which may occur due to events that took place
in the past. Specifically, title insurance protects the buyer against
loss resulting from previously unreported land title defects insured
against, such as forgeries, claims by missing heirs, recording errors,
etc.
What are the principal features of title insurance?
Protection: If a future claim against the
title to real property results either in the loss of title to
the property, or expenses to clear up title defects uncovered
by such claims, title insurance will provide compensation up
to the face amount of the policy.
Legal Defense: Should a future claim against
the title to property require legal defense, Lawyers Title will
work with the insured to provide for legal defense of the title
and to pay the cost of defense, even if the costs exceed the
face amount of the policy. This is true regardless of how many
claims are brought during the life of the policy.
Up-to-date Information: A title search
of the public records conducted prior to issuing a title insurance
policy reveals the rights a buyer has with regard to future development
of the property. These include rights of way, easements, etc.,
as well as restrictions that may have been placed on the use
of the property by previous owners.
One-time Premium Payment: For the cost
of a single, one-time premium, title insurance protects the property
owner against loss resulting from any title defects to the property
covered in the policy for as long as the property is owned.
What are the Principal Forms of Title Insurance?
There are two principal forms of title insurance:
The Owner's Policy, which protects the
property owner against loss resulting from defects in the title.
The Mortgage Policy, which insures that the holder
of the mortgage has a valid lien on the property and indemnifies the
holder of the mortgage against loss resulting from title defects insured
against.
Why are two kinds of policies sometimes needed on a single
property?
If a buyer pays cash for a property, only owner's
title insurance is needed. In cases where capital is borrowed to
purchase the property, the mortgage policy protects the lender's
invested capital by insuring a valid lien in case the mortgage
is foreclosed. This protection enables the mortgage lender to sell
the mortgage to other types of investors, such as insurance companies,
which in turn act to bring in "new" money from other
parts of the country for use in local mortgage lending.
What is the Difference between Property or Casualty Insurance
and Title Insurance?
Property/casualty insurance protects the property
owner against future events that might adversely affect the value
of his or her property, such as fires, floods, etc. It is written
for a fixed term for which the company receives a stated premium.
At the end of this period, premiums may increase or decrease in
line with the company's loss experience.
A title insurance policy, on the other hand, is or can
be perpetual as to term. Only one initial premium is charged for the
risks that are assumed and carried over the years.
Information on this web site is not intended as legal advice.
Title Insurance Coverage may vary by state, so contact your local Lawyers
Title Agent with specific questions.
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