What Is Title Insurance?
Title insurance is a contract of insurance by a title insurance company to indemnify the insured against loss suffered because of record defects in title, unmarketability, liens, easements, and encumbrances not shown in the policy. The policy is issued after thorough research of the public records by highly trained professionals. Since the policy is a contract, insured’s are protected pursuant to the policy without the necessity of showing negligence on the part of the insurance company.
Why is Title Insurance Needed?
The answers to these two questions are of importance to every person who is a party to a real estate transaction. Involved in every real estate transaction is a complex, intangible thing called a TITLE: It is the TITLE to the seller’s property that the seller sells to the buyer. Determining whether or not land titles are marketable is complex. Assurance in addition to the seller’s statement in the Warranty Deed as to the condition of title is desirable. Title insurance provides buyers and mortgage holders contractual assurances from regulated corporations, required to maintain reserves.
The members of the Oregon Land Title Association have prepared this material to answer the above and other common questions about title insurance.
Why Is Title Insurance Needed?
It reflects the condition of the record title and protects against loss by reason of forgery, missing heirs, errors in public records, deeds executed by those under legal disability, deeds executed and recorded but not validly delivered and numerous other matters which may affect ownership.
Does Title Insurance Cover the Insured from Every Kind of Loss?
No. It is based upon an examination of matters disclosed by public records such as deed and mortgage records of the county, city and county tax and assessment records. Because the title company does not normally inspect the land itself and usually does not cause it to be surveyed, standard title insurance does not cover matters that would be determined by an inspection or survey of the property. There are other exclusions and exceptions from coverage which generally involve government rights to change laws, information not on the public records and rights such as water rights.
What Protection Does Title Insurance Give?
Unless an exception is expressly set out in the policy, it insures not only the record title, which can be determined with difficulty, but also against such things as forgery of signatures, false impersonation, incompetency of former owners by reason of their being minors or mentally ill, and the interests of missing heirs whose names do not appear in the probate of estates. These are matters which can totally defeat ownership but which are “invisible” risks.
Are There Different Kinds of Title Insurance Coverage?
Yes. Title insurance in several forms is issued to real estate owners, purchasers under contracts of sale, and mortgage lenders. There are other special forms of coverage. Title insurance policy forms are standardized. A title professional can provide you with a sample policy and can explain the various types of coverage.
Before a Deal is Closed, Can Parties in a Real Estate Transaction Find Out Whether Title Insurance Can Be Obtained?
Yes, they can by making application to a title insurance company or title insurance agent in the county where the property is located. Please see the directory on our job site for members in your area. A preliminary title report will be issued prepatory to issuance of a policy after closing. Such preliminary reports are issued only upon receipt of an order for title insurance for a specific amount of liability.
If My Lender Has a Title Insurance Policy, Does It Protect the Land Owner?
No. The owner cannot make a claim for loss against the title company based on the lender’s policy.
If the Preliminary Report Shows Something Defective in the Title to the Property, What Happens?
It is customary for the seller to take the preliminary reports to the seller’s attorney. The attorney and the title professional will know the proper procedure for clearing title defects.
When Is the Policy of Title Insurance Protecting the New Owner Issued?
The title insurance policy is issued after the deed to buyer has been delivered and recorded.
When Is the Policy of Title Insurance Issued if I am Buying Under a Contract of Sale?
Your policy of title insurance is usually issued after the contract of sale has been signed and recorded.
A Policy of Title Insurance was Issued Insuring my Title When I Bought my Land.
Why should I Have it Re-issued in my Buyer’s Name When I am Selling?
Only the insured named in the policy is protected if a claim is made. The purchaser wants, and is entitled to have, fill information as to the condition of the title right up to the date of sale. Hundreds and possibly thousands of legal instruments have been recorded since you bought the land. How many of them affect your land? That is what the preliminary report will show to the purchaser.
How Can I Know that I Can Rely on the Protection Offered by Policies of Title Insurance
Issued by Members of the Oregon Land Title Association?
Title insurance companies are subject to the requirements of the laws of Oregon applicable to insurance companies generally and to the rules and regulations of a State Insurance Commissioner. Each is required to maintain a deposit with the State Treasurer of a required sum to secure liabilities under its policies. Every title insurance company operating in the State of Oregon must have access to complete title plant and is subject to inspection by the Insurance Commissioner.
Members of the Oregon Land Title Association subscribe to title record standards and participate in continuing education which should provide additional confidence in their abilities.