The History of Title Insurance

The need for title insurance arose historically from the fact that traditional methods of conveying real property did not provide adequate safety to the parties involved. Until a century ago, transferring title to real property was handled primarily by conveyancers, who were responsible for all aspects of the transaction. The conveyancer conducted a title search to determine the ownership rights of the seller and any other rights, interests, liens or encumbrances that might exist with respect to the property, and, based on its search, provide a signed abstract (or description) of the status of the title. Although the conveyancer was generally not a lawyer, that individual was recognized as an authority on real estate law. The origin of title insurance is directly traceable to the limited protection that the work of such a conveyancer provided to the purchaser of real property. In 1868, the celebrated case of Watson v. Muirhead (57 Pa. 161) was filed in Pennsylvania. In that case, Muirhead, a conveyancer, had searched and abstracted a title for Watson, the purchaser of a parcel of real property. In good faith and after consulting an attorney, Muirhead chose to ignore certain recorded judgments and to report the title as good and unencumbered. On the basis of Muirhead's abstract, Watson went ahead with the purchase, but was subsequently presented with, and require to satisfy, the liens that Muirhead had concluded were not impairments to title. Watson sued Muirhead to recover his losses, but the Pennsylvania Supreme Court ruled that there was no negligence on the conveyancer's part and dismissed the case. Watson, an innocent purchaser who had suffered financial damages because of the encumbrances on his title, had no recourse. The decision of Watson v. Muirhead demonstrated clearly that the existing conveyancing system could not provide total assurance to purchasers of real property that they would be safe and secure in their ownership. As a result of that decision, the Pennsylvania legislature shortly thereafter passed an act "to provide for the incorporation and regulation of title insurance companies." The first title company was founded in Philadelphia in 1876. This new type of insurance (called "title insurance"), addressed the concerns raised in Watson v. Muirhead by providing: 1. Responsibility without proof of negligence; 2. Financial protection through a reduction of the risk of insolvency; and 3. The assumption of risks beyond those disclosed in the public records (for which the abstractor was not liable). Since the late 1800s, the title insurance industry has grown to where it now is an essential component in an overwhelming majority of real estate transactions in this country. The services provided by the title insurers may vary somewhat from one area of the country to the other, reflecting the different laws, customs and procedures of the various states and counties throughout the nation. But the essential purpose of these services is the same - to assist all of the parties in real estate transactions by ensuring that the acquisition or transfer of an interest in real estate can be effected with a maximum degree of efficiency, security and safety.

What is Title Insurance?

When buying a home for the first, or even second, time, you know that many considerations will arise in addition to the usual concerns like the mortgage and closing fees. Purchasing insurance is now a factor, and depending on where you live you may be faced with taking out policies for home, fire, and flood. However, few new home buyers may realize the need for another specific policy, particularly if the home they are buying is not new. Title insurance can prove valuable to the homeowner. What is Title Insurance? Simply defined, title insurance protects the homeowner against loss when issues tied to the property's title come into questions. The title is essentially the deed to the property, the legal document that transfers ownership of the home, land, and whatever else is specified therein from one person to another. In an ideal real estate transaction, the seller will sign the title over to the buyer. The document now proclaims that the buyer is now the owner of the property. It should be a cut and dry process, but in certain situations the title of a property may come into dispute. For example, a home that had been owned over generations - sold to an outsider - may become the object of a legal battle should somebody in the family claiming to be the rightful owner decide to challenge the title. Also, it may come to pass that a seller who has no authorization to transfer a title does so anyway - maybe through forgery - thereby committing a fraudulent transaction. The holder of the title may then have to face legal and financial problems that could result in losing the property. What Title Insurance Does With title insurance, any possibilities of problems arising from a real estate transaction are smoothed over to allow for a clean sale. Unlike other types of insurance which pay after something happens, title insurance works protects the policy holder from losses incurred prior to the policy's release. Issues such as ownership disputes, unpaid taxes or liens are handled and cleared before the sale is final. What Title Insurance Does Not Do As mentioned earlier, title insurance differs from policies like car and fire insurance in that it doesn't cover losses the occur after the sale. If someone were to put a lien on your home, the title insurance would not cover any losses since the event happened after the policy was taken out. The insurance only protects you from losses involving the property's previous owner. In turn, should you decide to sell your home, a prospective buyer may take out a policy to protect himself from any issues (ownership, taxes) you have had as a homeowner. While title insurance is not required for the homeowner, it can be a good investment for those seeking to buy certain properties. When the you consider the possibilities, having title insurance may save you a few headaches as you purchase your new home.

Why You Need Title Insurance

Protecting your Home Investment A home is usually the largest single investment any of us will ever make. When you purchase a home, you will purchase several types of insurance coverage to protect your home and personal property. Homeowner's insurance protects against loss from fire, theft, or wind damage. Flood insurance protects against rising water. And a unique coverage known as title insurance protects against hidden title hazards that may threaten your financial investment in your home. Protecting Your Largest Single Investment Title insurance is not as well understood as other types of home insurance, but it is just as important. You see, when purchasing a home, instead of purchasing the actual building or land, you are really purchasing the title to the property - the right to occupy and use the space. That title may be limited by rights and claims asserted by others, which may limit your use and enjoyment of the property and even bring financial loss. Title insurance protects against these types of title hazards. Other types of insurance that protect your home focus on possible future events and charge an annual premium. On the other hand, title insurance protects against loss from hazards and defects that already exist in the title and is purchased with a one-time premium. Two Kinds of Title Insurance Benefit You in Two Ways There are two basic kinds of title insurance: Lender or mortgagee protection, Owner's coverage. Most lenders require mortgagee title insurance as security for their investment in real estate, just as they may call for fire insurance and other types of coverage as investor protection. When title insurance is provided, lenders are willing to make mortgage money available in distant locales where they know little about the market. Owner's title insurance lasts as long as you, the policyholder - or your heirs - has an interest in the insured property. This may even be after you have sold the property. Depending on local practices and state law where the property is located, you may pay an additional premium for an owner's policy or you may pay a simultaneous issue charge - usually a smaller amount - for the separate lender coverage. You may even split settlement costs with the seller for the lender or owner's policy. What does Your Premium Really Pay For? An important part of title insurance is its emphasis on risk elimination before insuring. This gives you, as the policyholder, the best possible chance for avoiding title claim and loss. Title insuring begins with a search of public land records affecting the real estate concerned. An examination is conducted by the title agent or attorney on behalf of its underwriter to determine whether the property is insurable. The examination of evidence from a search is intended to fully report all "material objections" to the title. Frequently, documents that don't clearly transfer title are found in the "chain," or history that is assembled from the records in a search. Here are some examples of documents that can present concerns: Deeds, wills and trusts that contain improper wording or incorrect names; Outstanding mortgages and judgments, or a lien against the property because the seller has not paid his taxes; Easements that allow construction of a road or utility line; Pending legal action against the property that could affect a purchaser; or Incorrect notary acknowledgments. Through the search and the examination, title problems are disclosed so they can be corrected whenever possible. However, even the most careful preventative work cannot locate all hidden title hazards. Hidden Title Hazards - Your Last Defense In spite of all the expertise and dedication that go into a title search and examination, hidden hazards can emerge after closing, resulting in unpleasant and costly surprises. Some examples of hazards include: A forged signature on the deed, which would mean no transfer of ownership to you; An unknown heir of a previous owner who is claiming ownership of the property; Instruments executed under an expired or a fabricated power of attorney; or Mistakes in the public records. Title insurance offers financial protection against these and other covered title hazards. The title insurer will pay for defending against an attack on title as insured, and will either perfect the title or pay valid claims. All for a one-time charge at closing. Your home is your most important investment. Before you go to closing, ask about your title insurance protection, and be sure to protect your home with an owner's title insurance policy.

Family Insurance - Protecting Your Greatest Asset

With so many different types of insurance now available, it can be difficult for some family's to know which coverage they must have, versus which ones they should have. Here are a few tips on choosing the right insurances for you and your family: -Think about your needs. -Consider your budget. -Think about future changes to your family. -Consider what would happen to your family if you didn't have a certain type of insurance. Once you've considered what your family's needs are, it'll be easier to decide which types of insurance are necessary. Here are a few of the most common insurance policies today's average consumer should consider: Health Insurance: No one can dispute the need for good quality health insurance these days, especially if you have children. The most common types of health insurance these days include: HMO Plans - the most restrictive type of health coverage, HMO's are also the cheapest for both the employer and the employee. These plans require participants to see only approved physicians. Specialists may be seen with a referral from your Primary Care Giver. Co-pays are relatively low, with virtually no deductibles on basic services. PPO Plans - is a combination plan, which works like an HMO, but allows patients to see any physicians they choose whether they participate in the plan or not, at an increased fee. Many people like the flexibility and options with this type of plan, however premiums are usually much higher and deductibles can reach 20% when seeing an out-of-network provider. Indemnity Plans - work very much like old-fashioned insurance policies. A patient sees any doctor they choose without a referral or pre-approval, but is responsible for 20% of the fee. Clearly the most versatile type of policy, it is also the most expensive, both in the case of premiums and deductibles. Automobile Insurance: If you own a car, you are legally bound to cover every driver in your household with collision and liability insurance. Disability Insurance: How would your family pay the bills if you were taken ill or injured and were unable to work for an extended period of time? Many employers offer short and/or long term disability insurance policies, but many do not. In the event that you are left unable to work due to medical circumstances, short term disability coverage will pay you anywhere from 60-100% of your current salary (depending on the policy), beginning 30-60 days after your injury, for a period of 3-6 months. Long-term disability insurance is just that - insurance for longer illnesses and injuries. Once your short-term disability coverage expires, long-term disability benefits will enact until you return to work. This is not the same as government disability benefits that some people with permanent disabilities may qualify for. Be sure t check with your employer to see if they offer these types of benefits. If not, you may want to consider purchasing your own policy, especially if you are a sole breadwinner or work at a high-risk job. Dental/Eye Coverage: While dental and eye coverage used to be a normal benefit for most fulltime employees, this is no longer the case, leaving some employees solely responsible for taking care of their family's dental and eye costs. These types of policies usually cap at a certain amount and only offer coverage on certain procedures. Still, they can be beneficial to those without enough income to handle these unexpected costs. Homeowner's/Renter's Insurance: If you own your own home, your mortgage company required you to carry enough insurance to cover the cost of the mortgage should your house be destroyed in a fire. But, what id you rent? Your landlord has coverage on the building, but you are responsible for covering your belongings. Fairly inexpensive, renter's insurance covers the cost to replace your furniture, clothes, appliances, personal items and displacement costs in the event of an apartment fire. Life Insurance: It's not always easy to consider your own mortality, or that of your spouse or children. But, accidents and illnesses do happen and people die. Life insurance for adults is meant to help your family continue to pay the bills in the event of your death and the loss of your income. Insurance for children is meant mainly to cover funeral costs and is a good idea for lower income families who would be financially burdened by these costs in the event of a tragedy. As you can see, there are many different types of insurance to consider. Check with your agent to see which policies are right for you.