The major difference between title insurance and other types of insurance covers is in its function. For homeowners and lenders, title insurance is the ultimate cover against defects and encroachments on their property title. Defects in this context usually include forgery, fraudulent ownership claims, illegal liens, and many more. While other types of insurance protect lenders from unforeseen circumstances that could occur in the future, title insurance exists to protect its holder from problems that may have occurred with the property in the past.

How It Works

For most lending processes, due diligence begins with the titleholder or agent opening a title insurance policy cover with a title insurance company or agent. The title insurance company will then perform a title search. After the search, the prelim report submitted by the title insurance company will allow the titleholder to review every lien and prior agreements found to have been recorded against the property in the past.

Two existing title insurance policies are currently in existence. They are:

  • Owner’s Policy
  • Lender’s Policy

Both policies come with clearly spelled out terms, conditions, and exclusions. They insure the property holders against or free them from losses that could arise from defects in the title, invalid liens, or incorrect title searches.

Why Get A Title Insurance?

Lenders use the title insurance policy to protect their property from existing liens that could hold sway over a new lien or prevent the enforcement of new liens. Title insurance is very important. It is arguably the most sold method of protecting your capital as a lender when rightly and precisely done. Review prelims carefully, with the title officer, your legal adviser, and the borrower in attendance. Doing this on time will check little problems that could potentially become critical in the future, ensuring the security of the transaction.

Insurance protects you against future damage. But, it can also protect you from the past. Find out how here.

https://www.linkedin.com/pulse/title-insurance-protections-lenders-california-lindsay-anderson.

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