Most property buyers understand that a title search is necessary to be sure they are receiving a marketable title at closing. However, there are some title problems, which cannot be discovered even through the most thorough title search.

There are hidden hazards, which are beyond the scope of a reasonable search of title records. These include such things as: forgeries, fraud, errors by the Clerk's office in the recording of deeds, mechanics liens, defective foreclosures, faulty surveys, misinterpreted wills, conveyances by a minor or a mentally incompetent person, an undiscovered heir or ex-spouse who returns to claim interest, a deed delivered after the death of the property owner, and other issues.

A title insurance policy protects you from a loss, which would result from any of the title defects above, up to the policy amount. A "Lender's" title insurance policy provides protection to the lender up to the loan amount. In the event of a claim a title insurer covering a lender will cover that lender's loss, acquire the note on the property and enforce payment of any remaining balance from the borrower.

An "Owner's" title insurance policy protects the property owner's real estate equity, which is the difference between the Lenders Title insurance policy amount and any liens or encumbrances on the property, which are specifically excepted in the policy.

The cost of an Owner's policy is minimal when obtained at the same time as the Lender's title policy because the title insurance company gives a "simultaneous issue rate."

A homebuyer pays a one-time premium for Owners title insurance, and the Owners title insurance itself lasts as long as the purchaser or his/her heirs own the property. Lenders title insurance must be reissued when refinancing the mortgage.

Remember that a title insurance policy does not ensure that title problems will not occur, but it does protect you from loss resulting from title defects, which threaten your ownership up to the policy amount. Title insurance also pays legal fees involved with defending your rights. Although title losses occur infrequently, they can be very expensive and time-consuming when you are not properly insured.

Owner's Title Insurance may not be included on your Good Faith Estimate because some lenders in certain states do not require it. Also in some states it is the responsiblity of the seller to pay for and provide it.

Adrian Skiles