What Is the Most Accurate Title Insurance Definition That Should Be Accepted?
Even though a lot of people know about title insurance and how important it is, not many actually know what it is. The concept of title insurance requires understanding how the process of buying and selling real estate typically works, as well as how the title of a real estate property can pass from an old owner to the new one. For example, titles aren’t always passed between a seller and a buyer when a real estate transaction is made, and there can be discrepancies, if a previous owner returns and makes a claim for the title after having allegedly sold or lost the property in the past. If the claim is legitimate, then the previous owner can even become the legitimate titleholder, which would effectively nullify the new buyer’s ability to hold on to the title and lead them to lose hundreds of thousands of dollars in the process.
The precise definition of title insurance is that it’s a type of indemnity insurance (a contractual obligation that one party has to provide compensation for the loss of the other party), to insure against financial loss and provide titleholders with a means to protect their claim to the title of a real estate property. While this definition can still be considered incomplete due to the vastness of options that title insurance policies can offer regarding the types of benefits that title searches have, it can give buyers a general idea of what it means. To put it simply, title insurance is designed to protect the titleholder from financial loss and the loss of the title, if possible. In most cases, this process will involve a title search, to look for discrepancies and mistakes associated with the title of the property, as well as compensation and support for dealing with the demands and costs of court proceedings, should the claim of a former titleholder lead to that.
There are essentially two types of title insurance policies: owner’s title and lender’s title insurance. While the latter only provides protection to the lender, the title insurance policy that actually protects the titleholder is the owner’s policy. Even though title insurance is available in a number of different countries – which includes Canada, Australia, the UK, Mexico, New Zealand and China – most of the title insurance policies recorded throughout the world are actually written and set in effect in the United States of America. The US also has some of the most elaborate laws and regulations that support title insurance policies and policyholders. So, as long as you own a title insurance policy in the United States, it’s safe to say you have the greatest amount of support and protection when faced with any types of mistakes or discrepancies related to the title of your real estate property.
It’s important to know that the title of the property you own is the sole evidence that you are the rightful owner. Even if you present your mortgage documents and other documents drafted during the transaction process in court, a previous titleholder who can present evidence that the title belongs to them can easily be granted the right of official titleholder, which would waive all the evidence presented on your behalf. Essentially, proving that you paid the mortgage would only prove then, that you bought the property from someone who wasn’t the rightful owner to begin with. This is the most significant reason why title insurance is so important. Having it from the start will prevent you from making the mistake of buying a property from someone who isn’t the officially accepted titleholder, and could even save you hundreds of thousands of your hard-earned US dollars in the process.