Title insurance guards against owner disputes

by M. Keith Chaffin

for the Business Journal

Unlike other forms of insurance, your title insurance premium is a one-time payment with a lifetime of coverage.

I'm sure you're thinking to yourself, "I know I've seen a fee for title insurance somewhere in my past. Title insurance is that annoying fee I always have to pay when I buy, sell or mortgage my real estate."

Considering the risk, compared to the cost, title insurance could be one of your best insurance investments.

Fire insurance protects you against losses from fire. Collision insurance guards you against the cost of a damaged car. Title insurance protects your title to real estate that you are about to acquire.

Real estate has always been considered man's most valuable investment. It is such a basic form of wealth that many special laws have been enacted to protect your ownership.

When you buy property, the seller and his heirs have strong legal rights regarding the property. There may be others, in addition to the seller, who have rights in the property, perhaps governmental bodies, adjacent property owners or contractors.

Some of the things a title search might uncover are unpaid taxes, mortgages, judgments against the owner or any previous owner, easements and any other court actions, or recorded documents which can affect title or the value of the real estate.

Title insurance companies will examine the records they have built from the courthouse records. Then they will find and report any defects in the title back to the customer before the transaction is complete. These matters can be corrected or simply shown as an exception to the policy.

Title insurance is the only form of insurance where the defects are identified prior to the policy and corrected. So you might ask "if the defects are corrected before the policy, why do I need the insurance?" This is a good question.

Title insurance protects you from missed or hidden defects that could come back later and have an affect on your real estate investment.

Title insurance also protects you from claims made on the real estate which cannot be discovered by a title examination alone.

For example, the title to your real estate could be threatened or lost by circumstances involving forgeries, marketability or errors in the records.

These matters would still be covered in your title insurance policy, protecting your investment.

If there is a claim made against your title which is covered by your policy, your title insurance company will protect you by defending your title in court if necessary, at company expense. Or the company will bear the cost of settling the claim if it proves valid, in order to perfect your title and keep you in possession of your property.

These are just a few of the ways of settling your claim. If the claim cannot be disposed of, then the insured will be reimbursed, exactly as the policy provides for.

Some ways consumers could protect themselves, would be to check the reputation of the title insurance company they are doing business with.

Specifically, has the title insurance company been in business a long time? Does the company have an actual and updated title plant, or are they merely searching the confusing records of the Recorder's Office? Does their closing-escrow officer have an accountable and experienced reputation?

I would then recommend that the consumer check and compare the cost related to the title insurance policy and the escrow services.

Finally, keep in mind, most people never pick their title insurance company.

Typically they let the people they are doing business with make the decision. You're paying for the policy, why not shop around?

Keep in mind that title insurance is worth every penny!

(M. Keith Chaffin is vice president of Hogan Land Title Company.)