Even the most extensive search done by a title search form cannot avoid claims.
Scenario: Suppose there are back taxes owed on a property that you are purchasing, unbeknownst to you. We had gone into the local courthouse, reviewed the tax files, but found no evidence of back taxes owed, due unfortunately, to a file is missing. We insured the property. Should the tax liability claim pop up at a later date, we pay 100% of that claim. If you did not have title insurance, you would be liable and have to pay the claim.
Without title insurance, the owner must pay claims like these. Liens, unpaid taxes, sewer and water bills, are assessments are attached to the property – not to the person incurring the delinquency. Therefore, if a previous owner had a judgment against his property, the new owner would become responsible. We insure against these circumstances.
To the extent that buying insurance protects you from the costs of unforeseen events and losses, then yes, insurance is insurance. You buy homeowner’s insurance in the event of a burglary, auto insurance to pay for repairs if there is an accident, and life insurance to pay for your child’s education if you are not there. These are all varieties of casualty insurance.
Land title insurance protects you too, but it covers a different kind of loss and its one-time premium is for much more than simple risk protection. Therefore no, not all insurance is the same.
Land title insurance protects you from events which may have happened in the past, not events that are likely to occur in the future, as does casualty coverage like automobile, fire, and flood insurance. Title insurance charges are based on a cost per $1000 of the property, to protect the homeowner from claims which could jeopardize all or part of his property.
Some common losses include, but not limited to:
Records misplaced in courthouses, boundary disputes, unpaid taxes, and hidden defects in the title, such as missing heirs, forgery, fraud and other items, which may not show up in even the most exhaustive title searches.
Unlike most insurance policies, you only pay for it once.
A title search is a historical examination of title. Inherent in the process are mistakes. As a result, there is no way to have a 100% accurate title search. Title insurance is designed to safeguard and warrant you against such mistakes.
Title insurance is a contract of indemnity against loss or damage arising out of defects in, or liens upon, the title to real property. It protects against losses due to past events, not events occurring after the date of the policy. Title insurance provides protection against problems that are not known to or discoverable by the insured.