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What is title insurance?

Posted by: raindrop 6 years, 4 months ago

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According to the California Department of Insurance, Title insurance is a contractual obligation that protects against losses that occur when title to a property is not free and clear of defects (e.g. liens,  encumbrances and defects that were unknown when the title policy was issued).

The terms of the policy define what risks are covered and what risks are excluded from coverage. The title insurer will reimburse you for losses that are covered, up to the face amount of the policy, and any related legal expenses. This protection is effective as of the issue date of the policy and covers defects arising prior to your ownership. Title companies issue policies on all types of real and personal property. Two types of title insurance policies for real property are common: a lender's policy and an owner's policy.

Two types of title insurance policies are available to owners of real property in California: California Land Title Association (CLTA) standard coverage policies and American Land Title Association (ALTA) policies.

A CLTA policy insures primarily against defects in title which are discoverable through an examination of the public record. This includes defects in title or recorded liens or encumbrances, such as unpaid taxes or assessments, and defects due to lack of access to an open street. A CLTA policy also covers a limited number of risks that are not discoverable through a search of the public records.

The ALTA policy provides greater coverage than the CLTA policy. Generally, the ALTA policy provides the same coverage as the CLTA policy, but also insures against defects, liens, encumbrances, easements, and encroachments and conflicts in boundary lines that are not reflected in the public records. Since an ALTA policy covers many "off-record" defects in title, the insurer will typically survey the property to be insured.

Since title insurance is required by your lender, the lender will specify the type of policy required.

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