Certain problems with respect to the title or legal ownership of real property can remain hidden, despite the most thorough title investigation. However, for the payment of a one-time premium, an insurance company will "insure" against financial loss which may result from title problems in the future. This coverage will remain in effect for as long as the purchaser owns the property. Of course, this doesn't keep a problem from occurring, but it provides monetary reimbursement should it occur. This monetary reimbursement does not extend beyond the buyer's purchase price for the property. However, for an additional cost, a "Market Value Rider" can be purchased which will increase the payment on a claim to account for appreciation in the value of the property.
There are various types of title insurance. The type of title insurance required by a mortgage lender is called "mortgagee" insurance. This insures your lender from any financial loss if a problem is discovered in the future with respect to your title to the property. Your lender usually requires you to purchase this policy to protect their interest in your home as security or collateral for the money they are lending you to buy the home. This insurance does nothing to protect you or your interest in the property.
The type of title insurance that protects a buyer's/owner's interest in the property is called an "owner's" or "fee" policy. (The word "fee" is a legal term referring to the nature of ownership of the property, not to the cost of the policy). This type of policy insures the owner from financial loss if a problem is discovered in the future with respect to the ownership of the property. Title insurance is necessary in order to transfer property where all known title problems cannot be resolved. However, while title insurance is not always necessary, it is always beneficial and usually advisable, as it provides additional financial protection to a buyer.
You are permitted to order title policy from whatever company you wish. However, Lacy Katzen LLP has a relationship with a title insurance agency which enables us to obtain title policies for our clients and affords us a greater degree of control over this process. If you allow us to purchase your title policy for you, we will receive a financial benefit as a result. However, since title insurance rates are set by the state, you are charged neither more nor less as a result of allowing us to order the policy for you and we believe that, by doing so, you will be provided with the best service available.