What is Title Insurance?

Title Insurance is a form of indemnity insurance which protects the insured against losses due to title disputes, defects in titles, and invalidity or unenforceability or mortgage liens. This type of insurance is most common in the United States but can also be found in Canada, Australia, the United Kingdom, Mexico, New Zealand, Japan, China, Korea, and across much of Europe and is meant to protect an owner’s or lender’s financial interest in a real estate property.

Typically used to insure ownership or mortgage, this type of insurance can also be applied to easements or leases and are broken down into two types:

1. Owner’s Policies

This type of policy assures the purchaser that the title to the property is vested in that purchaser and is free from defects, liens, or encumbrances except those listed in policy or not covered by the policy. This policy also provides coverage for losses due to lack of right of access.

2. Lender’s Policies

This coverage is typically for mortgage lenders and protects them from losses due to:

• Defects, liens, or encumbrances on the title;
• Lack of right of access to the land;
• Invalid or unenforceable liens; and
• Other similar property disputes.

Title insurance is necessary in many areas due to the structure of land record laws. In much of the industrialized world a land registration system is used for the transfer of land titles or interests. This means that the government decides title ownership and encumbrances and their decision is final. Errors may be compensated financially but there is little recourse to challenge decisions or recover property. In the majority of U.S. states they instead use a system of document recording which does not include an official government ruling on ownership of property except in cases of disagreement. This means that determining the correct owner of a specific title can be a complicated process which involves scrutinizing records and determining how the affect the title based on applicable laws. This makes insurance a necessity to protect against claims. The final arbiters in this system is the courts system which makes decisions only in suits brought forward by disagreeing parties.