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            Introduction to Title Insurance

What Title Insurance Insures

Title insurance is insurance against the reduction or
diminishment of an interest in real property.  Therefore there
must be a loss for a claim against the title insurance policy to
succeed.  Such loss is either the reduction in value of an
interest in real estate as a result of undisclosed defects in the
title, the interruption of the right to occupy the subject property
as a result of undisclosed third parties with superior rights to
occupy the property, or the loss of priority of an insured lien as
a result of undisclosed superior lien rights.  

The loss for an owner’s title insurance policy is the difference
between the value of the ownership interest in the insured real
property if there was no defect in title to the real property and
the actual value of the real property with such undisclosed
defect in title.  The loss for a leasehold owner’s title insurance
policy is the difference between the value of the right to occupy
the insured real property if there was no superior rights to
occupy the property that were enjoyed by a third party or there
was no defect in title to the real property and the actual value of
the right to occupy the insured real property with such superior
rights to occupy the property being enjoyed by a third party or
with such undisclosed defect in title.  And the loss for a
mortgagee title insurance policy is measured as the reduction in
value of the insured lien that results from the loss of priority of
the insured lien to a superior lien that was not previously
disclosed.

However, the loss in value of the real property interest must be
as a result of one of the following insured risks for the title
insurance policy to provide protection: an instrument that is not
specifically disclosed within the policy and therefore excluded
from the title insurance coverage (a separate schedule of
exceptions to the insurance coverage is part of the title
insurance policy and is usually identified as Schedule B);
instruments recorded in the Public Records which were
overlooked or not discovered in the title search undertaken by
the company that issues the title insurance policy or their agent;
defects in the documents that are not obvious by examination of
the Public Records such as forgery or fraud; errors or omissions
in the Public Records themselves; errors in judgment by the title
examiner as to the legal effect of documents; or the lack of a
right of legal access (not necessary physical or practical
access) to the real property.

The title insurance policy also allows for certain related costs
and expenses to be included in the insurance coverage so the
company that underwrites the title insurance policy will pay the
costs, attorneys’ fees and expenses incurred to defend the
insured interest in the real property against the claims of third
parties.

                                                         Return to Introduction to Title Insurance
Law Office of
Craig W. Little, P.A.