Title Insurance

What is Title Insurance?

Title insurance indemnifies against financial loss from defects in title to real property and/or from the invalidity or unenforceability of mortgage liens. It is intended to protect both the owner and/or a lender against loss due to title defects, liens or other matters. Title insurance also defends against lawsuits challenging the title as it is insured, or reimburses the insured for the actual monetary loss incurred, up to the dollar amount of insurance provided by the policy.
Before the closing of a loan or a purchase takes place, the public records are searched and examined to determine ownership, limitations to that ownership, encumbrances and any adverse matters affecting title to the property. These records are searched by examining the official courthouse records, where all recorded documents, judgments, liens, tax assessments (such as street or sewer), special taxes, and other matters, such as divorce and bankruptcy, are filed. The results of this examination will then be provided in a preliminary title report or “commitment” to insure the property. A title commitment is a binding contract which reflects the current status of title before a loan or sale is closed, and binds the title company to issue its title insurance in favor of the insured as owner or mortgagee of the property being searched, subject to certain conditions and stipulations.

The Process

Before the closing of a loan, purchase or refinance takes place, the public records are searched and examined to determine ownership, limitations to that ownership, encumbrances and any adverse matters affecting title to the property. These records are searched by examining the official courthouse records, where all recorded documents, judgments, liens, tax assessments (such as street or sewer), special taxes, and other matters, such as divorce and bankruptcy, are filed. The results of this examination will then be provided in a preliminary title report or “commitment” to insure the property. A title commitment is a binding contract which reflects the current status of title before a loan or sale is closed, and binds the title company to issue its title insurance in favor of the insured as owner or mortgagee of the property being searched, subject to certain conditions and stipulations.

If there are serious problems found in the chain of title, the title insurer will report those matters and also exclude them from coverage. Buyers and lenders know there are some limitations which must be removed prior to closing, such as paying off a prior mortgage and release of a prior mortgage or judgment. Otherwise, these will continue to adversely affect the property and the priority of their interests after closing. Sometimes problems are discovered and a title company may choose to “insure over” the matter in order for the transaction to proceed as planned.

The Benefits of Title Insurance

  • Clears title problems
  • Pays valid claims
  • Provides a defense for claims attacking the title as insured
  • Americans close their loans faster than any other country – 30 days on average
  • Allows purchasers and lenders the guarantee against fraud or defect
  • Fosters lenders to be more willing to lend because of ownership indemnification
  • Insures your interest against loss or damage resulting from any title risks covered by that policy up to the amount of the policy, including attorneys’ fees and expenses required to protect or guarantee under the policy
  • Costs for title insurance in the State of New Jersey are fixed (but the quality of the indemnifying company is not)
  • Title insurance premium is paid only once

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