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OWNERS TITLE INSURANCE COVERAGE
Use the following links to review additional information on Owners Title
Insurance and Frequently Asked Questions.
WHAT IS TITLE INSURANCE?
Title insurance is an exclusively American invention. Its purpose was well
stated in the first advertisement for title insurance back in the late 1800s:
"This company insures the purchaser's of real estate and mortgages against loss
from defective titles, liens, and encumbrances. Through these facilities [the]
transfer of real estate and real estate securities can be made more speedily
and with greater security then heretobefore." [circa 1876]
Protecting purchasers against loss is accomplished by the issuance of a title
insurance policy, which states that if the status of the title to a parcel of
real property is other than as represented, and if the insured suffers a loss
as a result of title defect, the insurer will reimburse the insured for that
loss and any related legal expenses, up to the face amount of the policy.
Title insurance differs significantly from other forms of insurance. While the
functions of most other forms of insurance is risk assumption through the
pooling of risk for losses arising out of unforeseen future events (such as
death or accidents), the primary purpose of title insurance is to eliminate
risks and prevent losses caused by defects in title arising out of events that
have happened in the past. To achieve this goal, title insurers perform an
extensive search of the public records to determine whether there are any
adverse claims to the subject real estate. Those claims are either eliminated
prior to the issuance of a title policy or their existence is excepted from
coverage.
TITLE ISSUES
The job of searching the public records to identify existing rights and
interests is not an easy task. The title searcher or abstractor reviews the
public records to find all aspects of title which can be seen and recognized.
From the title search, the title examiner produces an opinion of title, from
which the Company will issue its insurance.
In many areas, title to a property can be traced back to a royal grant,
charter, or the United States government. In many areas, titles are not traced
back that far; instead, local custom or title insurance company requirements
dictate a shorter search.
There are few titles, if any, that have a perfect history from their source, or
root, to the present day. Each transfer of ownership is a "link" in what is
referred to as the "chain of title." As each
transaction or link takes place, there is a potential for a problem. Even if
the entire chain of title appears to be in order, the chain is still subject to
interpretation. When searching a title, what we are trying to determine are the
various rights and interests that make up each link in the chain as it has
passed from one owner to another.
A "title" is composed of three basic elements.
1. Rights and interests that are disclosed in the public records or by physical
inspection of the property, i.e., deeds mortgages, leases, etc., parties in
possession, utility easements, etc.
2. Rights and interests that are not recorded but exist, i.e., limitations
imposed by laws and statutes, etc.
3. Rights and interests that are hidden, i.e., forgeries, secret marriages and
unknown heirs.
Every title is made up of many different "rights" and "interests" that may be
owned by different people. The "owners" of the property own the most valuable
of the property's rights and interests, but other people may also have rights
to the property, such as easements for utilities or mortgages, etc.
Each title can be compared to sticks in a bundle. The rights and interests are
represented by the sticks. The "owners" own what we call a "fee simple" title,
that is, they have purchased the most vital and valuable sticks including
rights of possession, use, occupancy, enjoyment, inheritance, etc. Also, within
the bundle are sticks that may be owned by other parties. These are called
encumbrances and may consist of easements, mortgages, liens, etc.
When a person purchases a parcel of real estate, it is not only the physical
property itself that he or she acquires, but the sellers rights and interests,
"the seller's title," in the property. It is essential for the prospective
purchaser to know before the transaction takes place, precisely what rights or
interests the seller can convey. The purchaser also needs to know who else may
have rights or interest in the property, and about any encumbrances against the
property that may affect the use or enjoyment of the land. The title search
must cover all these rights and interests.
WHY DO YOU NEED IT?
Buying a new home is one of life’s most gratifying experiences. As you approach
the big day of closing, however, all the details can be a little overwhelming.
You might easily overlook the single most important step in the entire process
– the purchase of Title Insurance on that wonderful new home of yours. Be sure
to visit the Title Tales links in the column to the left for “real life
stories” involving title insurance protection.
WHAT IS A TITLE?
A title is the evidence, of right, that a person has to the ownership and
possession of land. It is possible that someone other than the owner has a
legal right to the property. If that right can be established, this person can
claim the property outright or make demands on the owner as to its use.
DO I NEED TITLE INSURANCE?
Most definitely! Title insurance is a means of protecting yourself from
financial loss in the event that problems develop regarding the rights to
ownership of your property. There may be hidden title defects that even the
most careful title search will not reveal. In addition to protection from
financial loss, title insurance pays the cost of defending against any covered
claim.
WHAT CAN MAKE A TITLE DEFECTIVE?
Any number of problems that remain undisclosed after even the most meticulous
search of public records can make a title defective. These hidden “defects” are
dangerous indeed because you may not learn of them for many months or years.
Yet they could force you to spend substantial sums on legal defense, and still
result in the loss of your property.
BUT THE LENDER ALREADY REQUIRES TITLE INSURANCE, WON'T THAT
PROTECT ME?
Not necessarily. There are two types of Title Insurance. Your lender likely will
require that you purchase a Lender’s Policy. This policy only insures that the
financial institution has a valid, enforceable lien on the property. Most
lenders require this type of insurance, and typically require the borrower to
pay for it.
An Owner’s Policy on the other hand is designed to protect you from title
defects that existed prior to the issue date of your policy. Title troubles
could put your equity at serious risk. If a valid claim is filed, in addition
to financial loss up to the face amount of the policy, your owner’s title
policy covers the full cost of any legal defense of your title.
HOW MUCH DOES TITLE INSURANCE COST?
The one-time premium is directly related to the value of your home. Use the
Title Insurance Calculator found on this web site. Try it out! Our
rates are filed with the state of Tennessee and are among the most reasonable.
Keep in mind when comparing our charges with those of other companies, our cost
include all attorneys fees, search and examination fees, commitment fees,
endorsements. We want you to know precisely what all your expenses will be,
before you place your order. No surprises at closing is our goal! That is why
we Guarantee our quotes in writing.
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