Title Insurance protects the holder from financial loss resulting from defects in the title to a property. Unlike most other insurance policies, title insurance identifies & eliminates possible risks and claims before they happen.
Issuing title insurance is a two-part process. First, the title company or attorney researches records to make sure there are no undisclosed heirs to the property, errors, unpaid taxes, pending legal action, fraud or other problems with the deed. Basically, the title must be clean, verifying that the seller really does own the property and is free to sell it. Next, the title company contracts with an underwriting company to issue an insurance policy that will pay for your defense if anyone challenges your title, and compensate you for your equity if you lose. Homebuyers typically need two title insurance policies: an owner’s policy and a lender’s policy, which protects the lender.