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                Introduction to Title Insurance

Title insurance is a form of insurance obtained in numerous
types of real estate transactions including purchases of real
estate, leasing of real estate, and the mortgaging of real
estate.  Title insurance provides indemnity against the loss that
results from an unknown defect that existed when the insured
interest in the real estate was acquired.  The loss covered by
title insurance is either a reduction in the value of the insured
interest in the subject property due to the undisclosed title
defect or superior rights enjoyed by a third party or the loss of
priority of an insured mortgage due to the existence of an
undisclosed, underlying, and superior lien on the subject
property.  Therefore, like other types of traditional insurance,
title insurance provides protection against loses but there are
significant differences between traditional insurance and title
insurance.   

Traditional forms of insurance provide coverage so long as the
recurring premium payments are paid or until the policy expires,
but upon the policy expiring or being terminated the insurance
coverage ceases.  Also, traditional insurance policies provide
protection against losses that result from events that occur
during the period of time that the insurance coverage of the
policy is effective.

The premium for a title insurance policy is not paid with
recurring payments as with traditional insurance policies but
rather with a single premium payment made at the time the title
insurance policy is acquired by the insured party.  

And a title insurance policy continues to provide coverage to the
insured party as long as the insured party retains the insured
interest in the subject property; therefore there is no set
expiration date for the title insurance coverage.  

Finally title insurance does not protect against losses caused by
events that occur after the commencement date of the title
insurance policy, as with traditional insurance policies, but
rather title insurance protects against losses caused by events
that occurred prior to the commencement date of the title
insurance policy.  So issuers of title insurance policies can
examine the prior documents and events that affect the subject
property and the related parties to ascertain what claims may be
made against the title insurance policy.  The title insurance
issuer can then either cure such title defects to eliminate the
potential claim or they can exclude such potential claims from
the coverage of the title insurance policy.

While title insurance is available in may transactions that involve
real estate, there are only a few
types of title insurance
available.  And
what title insurance insures against and what
title insurance does not insure against is vital to understanding
the utility and limitations of title insurance and what protections it
will provide to the insured party.

While the title insurance policy ultimately provides the protection
to the insured party, the process of issuing a title insurance
policy begins with the
production of a title insurance commitment
and understanding how the title insurance commitment is
produced and
what is included in the commitment is vital to
ensuring that the insured party enjoys the appropriate
protections from the title insurance policy.  The process of
“marking up” the title insurance commitment and finalizing the
title insurance policy must also be understood to ensure proper
issuance of the title insurance policy.  And finally understanding
what is included in a title insurance policy is necessary to
understand the protections afforded by the policy.

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Law Office of
Craig W. Little, P.A.