Chances are, the purchase of real estate is the largest single investment you will ever make. The loss of such an important investment would be catastrophic. It pays to be certain that the person selling the property has the ownership rights you think you're buying, but that's not always easy to determine.

An owner's rights to property - which often involve family and heirs - are sometimes obscure. There may be other parties (such as government agencies, lenders or private contractors) who also have rights to the property in the form of outstanding claims. How can you be sure you will be the true owner of the property you're buying? Simply purchase a Title policy.

What is title insurance? Title insurance offers you information on the status of the title to land before you buy - and protection against claims that may affect the title after you buy. Here's how it works: Before your real estate transaction closes, the public records are searched to find all related official documents. These documents are then examined for their effect, and form the basis of the title insurance policy.

The examination reveals the current status of ownership and encumbrances. It shows the current record owner, based on a careful evaluation of all records. It also shows the current limitations on that owner's property rights, such as outstanding mortgages and utility easements. A buyer or lender knows that some of these limitations should be removed (by paying off and releasing a prior mortgage, for example), or they will continue to adversely affect the property after the closing.

If the status of title is cleared before you buy, why do you need title insurance? Because even after the most careful research, some title flaws - such as forgery, fraud or confusion due to similar names - may go undetected. These problems may surface at any time in the future.
Protection against future claims is provided by a title insurance policy, which is issued after your transaction is complete. Policy terms and conditions determine the extent of coverage provided. This insurance policy insures the condition of title. Separate policies are usually issued to protect the owner's and the lender's interests.

It is in the lenders best interest to protect their investment. A loan policy protects the lender against loss due to unknown title defects. It also protects the lender's interest from certain matters, which may exist but not be known at the time of sale.
But this policy only protects the lender's interest. It does not protect you. That's why you need an owner's policy, which can be issued at the same time as the loan policy for a nominal one-time fee. By obtaining a separate owner's title insurance policy, protection continues for as long as you or your heirs own the insured interest, and without any additional fee.