"Title" is a term that describes your legal rights to own, control, and sell land. Title consists of all previous ownership, uses, transfers, and mortgage/liens. Prior to closing a transaction, our abstractors and attorneys conduct a title search and confirm that title to the property is free of defects or encumbrances and that the seller can legally transfer the property. Title insurance is an insurance policy that protects against future loss should the title condition be any different than when the policy was written. Covered losses include errors in the title examination as well as so-called "hidden defects". Hidden defects include fraudulent transactions, forgeries in documents, errors in the clerk's records, and many other error or omissions that affect title.
There are two types of title insurance policies, a lender's policy and an owner's policy. A lender's policy protects the lender against any title defect which impairs their ability to foreclose should the borrower default. This policy does not afford any protection to the owner/purchaser, and coverage is limited to the loan balance, plus interest and reasonable fees. An owner's policy protects the land owner against any title losses up to the full value of the property. Because a title policy is an insurance policy, if a claim is made against the title, the title insurer must pay any and all costs associated with the defense against the challenge and, if unsuccessful in that defense, reimburse the landowner for any reduction in the value of the land.