What Is Title Insurance? Albuquerque NM
I hope this article will answer your questions what is title insurance?
Title insurance is a contract under which the policy holder is protected from losses arising from defects in the title. A title insurance company determines whether title is insurable, based on a review of the public records. Unlike other insurance policies that insure against future losses, title insurance protects the insured from an event that occurred before the policy was issued. Title insurance is considered the best defense of title. The title company will defend any lawsuit based on an insurable defect and ply claims if the title proves to be defective.
The premium for title policy insurance is a one time payment paid at closing. The cost of the policy is related to the value of the real estate.
After examining public records, the title company usually issues what may be called a title commitment to issue a title policy. This describes the type of policy that will be issued and includes:
- Name of the insured party
- Legal description of the real estate
- The estate or interest covered
- Conditions and stipulations under which the policy is issued and
- A schedule of all exceptions, including encumbrances and defects found in the public records and any known unrecorded defects.
A standard coverage policy normally insures the title as it is known form the public records. In addition, the standard policy insures against such hidden defects as forged documents, conveyances by incompetent grantors, incorrect marital statements, and improperly delivered deeds.
Extended coverage, as provided by American Land Title Association (ALTA) policy, includes the protections of the standard coverage policy plus additional protections. An extended policy protects a home owner against defects that may be discovered by inspection of the property: rights of parties in possession, examination of survey, and certain unrecorded liens.
Title policy insurance does not offer guaranteed protection against all defects. A title company will not insure a bad title or offer protection against defects that clearly appear in a title search. The policy generally names certain uninsurable losses called exclusions. These exclusions include zoning ordinances, restrictive covenants, certain water rights, and current taxes and special assessments.
There are two types of title insurance. An Owner’s Policy is issued for the benefit of the owner or new buyer and his or her heirs. A lender’s policy is issued for the benefit of the mortgage company. The amount of coverage depends on the the mortgage loan.
In Albuquerque Metro area, it is customary for the seller to pay for the standard owner’s policy and the buyer pays for the mortgagee policy. I hope this article will answer your question, What is title insurance?