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Revised June 08, 2002 .
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The
official definition of Title Insurance is
the "assurance of indemnification for
loss occasioned by defects in the title to
real property or to an interest therein
which is insured." In English,
that means Title Insurance is a contract to
underwrite against financial losses incurred
as the result of liens or encumbrances upon,
defects in or inability to market the title
to residential or commercial real property
as described in the Title Policy.
Because land endures over generations, many
people may develop rights and claims to a
particular property. The current owner's
rights, which often involve family and
heirs, may be obscure. There may be other
parties (such as government agencies, public
utilities, lenders or private contractors)
who also have "rights" to the
property. These interests limit the
"title" of any buyer. Before
a title insurance company can issue the
Title Policy a few steps must be taken:
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First, the title
company performs an extensive search
of all recorded documents related to
the property (i.e. Recorder of
Deeds, Prothonotary, Register of
Wills, etc.). These records are then
examined by experienced title
officers to determine their effect
on the current status of ownership
and a report is issued to you or
your agents for review. This
examination will discover any
pending title problems that must be
taken care of prior to purchasing
the property, like tax liens,
mortgages, judgments, or potential
defects in the chain of title.
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Second, after
reviewing the title search results,
the Title Insurance Agent will issue
to the Lender and/or Purchaser, a
Title Binder or Commitment to
Insure. The Title Binder serves as
notice to the Lender and Purchaser
that upon satisfactory removal of
the liens and objections to title as
set forth in the Title Binder, the
Title Insurance Company will issue
the appropriate Loan and/or Owner's
Policies.
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You may ask yourself
"if all this research is done prior to
purchasing the property, why do I need Title
Insurance?" The answer is, even
with the extensive research, some title
flaws may go undetected. The most common
flaws are:
| Confusion due to similarity of names
| Invalid court proceedings
| Previously unrecognized rights of
spouses
| Mistaken legal interpretations
| Defective deeds
| Forgery
| Undisclosed heirs |
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These types of problems may surface at
any time in the future. We Protect
against these problems with the title
insurance policy that is issued after our
research. There are two types of
policies generally issued when you purchase
a property.
| A lender's policy covering the
lending institution for the life of
the loan.
| An owner's policy covering the
homebuyer for total amount paid for
the property. |
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Each policy is a contract of indemnity
that agrees to assume the responsibility for
defending your title against any defect
covered by policy's terms and to reimburse
you for financial losses up to the policy
limits.
For more information on title insurance
please see the FAQ.
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