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Understanding Title Insurance
Title insurance is a contract on the part of a title insurance company to reimburse the insured for any loss that may arise from any undisclosed defect in the insured's title to real estate. In addition, the title insurance company agrees to defend the insured in any claim, valid or not, against the property. An important protection because the expense and time involved in defending against a claim jean be considerable.
Title insurance is a single-premium, perpetual policy. It remains in effect as long as the original insured and his heirs own the real estate, whether for a month or a century.
Like other insurance, title insurance assumes unusual but serious perils for the real estate owner. Unlike other insurance, however, it represents protection against hidden defects already in existence on the date the policy is issued rather than against future events. A flaw in title to a parcel of real estate usually grows out of some incident long past that turns up to disturb the present ownership.
In some regions of the United States, little title insurance is sold. Buyers of realty rely instead upon certificates of title issued by attorneys. However, since the certificate of tide involves only a title search and investigation of records, it does not afford the same degree of protection that title insurance provides. There are some flaws in title that no amount of checking would ever uncover because they are not in the records. For example, an undiscovered will may create claims against real estate, as may undisclosed marriages and divorces. Also, signatures may be forgeries, or a legally incompetent party may sign a document.
Against all these difficulties, an opinion or certificate of title is no defense. But title insurance will indemnify or protect the insured buyer against loss arising from all such unknown, undiscovered claims not specifically mentioned in the title search report.
Title insurance has the distinction of being one of the few forms of insurance originating in the United States. The first title insurance company was the Real Estate Title Insurance Company of Philadelphia, founded in 1876.