Title Insurance Compared to Other Insurance
The basic function of any type of insurance is to shift risk from one party to another for a fee or premium. An automobile owner pays a premium to an insurance company to assume the risk of loss for any accident in which the owner might become involved. Insurance companies survive by correctly calculating the balance between income and claims losses.
Before any insurance company agrees to insure a party, the company performs a process of evaluating the level of risk. This process is generally called "underwriting ".
Title insurance companies insure parties against loss resulting from matters affecting title to real property. These companies evaluate the history of the ownership of the property and charge an owner and/or a lender a premium to insure that there is nothing in that history that will result in a loss to the insured. Unlike other forms of insurance, title insurance relies on a single premium paid at the time of acquisition of the interest in the property.
Title Insurance for Owners
If you obtained a mortgage loan in order to purchase your new home, the lender probably required you to purchase a title insurance policy in its name to insure the validity of its mortgage as a lien on your property. THAT POLICY DOES NOT PROVIDE ANY COVERAGE FOR YOU.
Owners desiring title protection must purchase a separate policy insuring their ownership interest. The essence of the owner policy is that it insures the owner against loss by reason of the status of the record title being other than as stated in the policy, subject, of course, to certain standard exclusions and exceptions relating to the particular property. Rates for owner title insurance policies are generally higher than for loan polices because of the higher risk and because the policy insures the entire value of the property rather than just the loan amount.
The current form of owner policy in general use is the 1992 American Land Title Association (ALTA) owner title insurance policy. Recently, the title insurance industry has introduced an optional, expanded coverage policy which is available at higher rates than the standard policy. This policy is based on the 1987 ALTA Residential Title Insurance Policy with additional coverages not contained in either ALTA policy.
Owners desiring to purchase title insurance for themselves now have the option to purchase the standard or the expanded form of coverage. This brochure provides general information about the coverages afforded by each policy. It is not an alternative statement of the coverages stated in the policies.
The Standard Owner Policy
This policy provides the basic coverages for persons desiring to protect their interest in the property. It insures the following:
1. You are the true owner of the property.
2. There are no defects, liens or encumbrances other than those that are listed in the policy.
3. The title you acquired is marketable and cannot be rejected by a subsequent buyer as being impaired by some defect that existed at the time you purchased the policy.
4. You have a legal right of access to the property from a public street or private right of way.
5. The company will defend your title if it is challenged and will pay costs, attorneys' fees and expenses to defend you against any claims made against your title which fall within the coverage of the policy.
6. CATIC increased the coverage by 10% each year for the first five years without additional cost.
The coverage under both the standard and expanded coverage policy continues in force for as long as you have an interest in the property. That means that you will also be covered after you sell the property and convey the title by warranty deed to the new owners. Should the subsequent owners later make a claim against you for some problem that would be within the coverage of your policy, the company will provide the protections listed in Paragraph 5, above.
The Expanded Owner Policy
This policy provides the coverages described in Paragraphs 1 through 5 of the standard owner policy description to you or your trustee plus the following coverages:
1. Use of the land for a single-family dwelling is not prohibited by zoning/recorded restrictions.
2. There are no pre-existing leases, contracts or options to purchase affecting your title or easements affecting your property.
3. No work or materials were provided to your property before acquisition for which a lien can be filed.
4. You cannot lose title to your property through forfeiture or reversion because of a preexisting violation of recorded restrictions.
5. You cannot be forced to remove an existing structure on the property because of a violation of zoning or private restrictions or because no building permit was issued for the structure.
6. There are no pre-existing violations of any recorded restrictions affecting your property.
7. You have a legal right of access to the property by both foot and vehicle.
8. Protection against loss involving:
a. Ownership claims of others based on forgery before or after acquisition of title.
b. Claims to divest you of ownership because of a pre-existing violation of restriction.
c. Claims of others to limit the use of your property based on a recorded restriction.
d. Refusal to fulfill a purchase contract, lease or make a mortgage loan because of prepurchase violation of restrictions.
e. Someone else builds on your property.
f Inability to sell because of violations of subdivision regulations.