WHAT IS TITLE INSURANCE?
A Word About Real Estate
Real estate has traditionally been a family's most valuable asset. It is a form of wealth that
is protected by many laws. These laws have been enacted to protect one's ownership of real
estate and the improvements located on the land. The owner, the owner's family, and the owner's
heirs have rights or claims in and to the property that you are buying. Those who may have an
interest in or lien upon the property could be governmental bodies, contractors, lenders,
judgment creditors, the Internal Revenue Service, or various other individuals or corporations.
The real estate may be sold to you without the knowledge of the party having a right or claim
in and to the property. In addition, you may purchase the real estate without having any
knowledge of these rights or claims. In either event, these rights or claims remain attached to
the title to the property that you are buying until they are extinguished.
The Past Can Determine Your Future
Generally, a person thinks of insurance in terms of the payment 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 for the future theft of the
car. Title insurance is a unique form of insurance. It provides coverage for future claims or
future losses due to title defects which are created by some past event (i.e., event prior to
the acquisition of the property.) These risks are far less obvious than those protected
against by automobile insurance, but can be just as devastating. The following information
will answer some commonly asked questions about title insurance.
Will You Get Clear Title?
It is of utmost importance that you receive clear title to the property when you purchase
real estate. In order to do so, you must first be informed of any existing rights or claims
that may, in the future, threaten your title and possession to the property. Title insurance
provides you with this twofold protection.
How Do You Find Out What Claims Exist?
In order to determine the status of title, Chicago Title conducts a diligent search of the public
records for those documents associated with the property. Chicago Title then examines those recorded
documents in order to determine if there are any rights or claims that may have an impact upon the title
to the property. The title search may reveal the existence of recorded defects, liens or encumbrances
upon the title such as unpaid taxes, unsatisfied mortgages, judgments and tax liens against the current
or past owners, easements, restrictions and court actions. These recorded defects, liens and encumbrances
are reported to you prior to your purchase of the property. Once reported, these matters can be accepted,
resolved or extinguished prior to the closing of the transaction. In addition, you are protected against
any loss or damage resulting from recorded defects, liens or encumbrances upon the title that are unreported
to you and which are within the scope of coverage of the particular policy issued in the transaction. This
is the first benefit you receive from title insurance.
What About Undiscovered Claims?
The title to the property that you have purchased could be seriously threatened or lost
completely by hazards which are considered "hidden risks." "Hidden Risks" are those matters,
rights or claims that are not shown by the public records and, therefore, are not discoverable
by a search and examination of those public records. Matters such as forgery, incompetency or
incapacity of the parties, fraudulent impersonation, and unknown errors in the records are
examples of "hidden risks" which could provide a basis for a claim after you have purchased
the property. In order to protect you against this possibility, Chicago Title provides
insurance coverage for such claims. This is the second benefit you receive from title
How Does a Title Insurance Policy Protect Against All These Claims?
If a claim is made against your insured title, Chicago Title Insurance Company protects you by:
(1) Defending your title, if necessary; and (2) Bearing the cost of settling the case, if it proves
valid, in order to protect your title and maintain your possession of your property.
Only One Premium
Unlike other forms of insurance, the original premium is your only cost as long as you or
your heirs own the property. There are no annual payments to keep your Owner's Title Insurance
Policy in force.