Two Types of Title Insurance Explained in Simple Terms

Title insurance is a crucial aspect of the home buying process, and it's essential to understand the two main types.

There are two types of title insurance: owner's title insurance and lender's title insurance.

Owner's title insurance protects the buyer's ownership rights, ensuring they have clear title to the property.

Lender's title insurance protects the lender's investment, ensuring they have a secured interest in the property.

In simple terms, owner's title insurance is like having a safety net for the buyer, while lender's title insurance is like having a safety net for the lender.

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There are two main types of title insurance: Owner's Title Insurance and CLTA/ALTA Title Policies.

Owner's Title Insurance, also known as an owner's policy, is purchased by the buyer to protect themselves against title problems that may arise in the future. It's usually issued in the amount of the real estate purchase for a one-time fee that lasts as long as you have an interest in the property.

A CLTA policy, on the other hand, is a California Land Title Association Policy that protects the policyholder against clouds on title that are uncovered through a public records search. This type of policy is often referred to as a standard policy and provides basic coverage against existing liens, clouds, defects, or other encumbrances related to record title.

Here's a comparison of the two types of title insurance:

Title insurance is a vital protection for homebuyers and lenders, and it's essential to understand what it covers. Title insurance protects against defects or "clouds" on the property title that may prevent free and clear ownership.

Liens or easements on the property that have not been recorded with the Register of Deeds, such as tax liens, contractors' liens, or child support/spousal support liens, are covered by title insurance.

Unintentional errors in any recording or filing of property documents, including inaccuracies in the legal description of the property, are also protected.

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Title insurance covers false or forged transfers of title or ownership interest, including transfer of title pursuant to the terms of an invalid will.

A CLTA policy, or California Land Title Association Policy, is a standard policy that protects the policyholder against clouds on title that are uncovered through a public records search.

The typical hazards a basic title insurance policy will cover includes claims of ownership by another party, flawed or missing records or inappropriate record keeping, judgments or encumbrances on the property, like pending lawsuits or outstanding liens, improper signatures, forgery of documents, fraud, unrecorded interests by a third party, and problems associated with a will.

Here is a list of some of the common hazards covered by title insurance:

Title insurance protects buyers and lenders from defects or "clouds" on the property title that may prevent free and clear ownership.

These clouds can include liens or easements on the property that have not been recorded with the Register of Deeds, such as tax liens, contractors' liens, or child support/spousal support liens.

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Unintentional errors in any recording or filing of property documents can also be covered by title insurance, including inaccuracies in the legal description of the property.

False or forged transfers of title or ownership interest are also protected against.

A CLTA policy, for example, protects the policy holder against clouds on title that are uncovered through a public records search.

Here are some examples of what a CLTA policy might cover:

An owner's title insurance policy, on the other hand, provides assurance that the title insurance company will help you monetarily and defend you legally if need be in the event that an unforeseen or hidden title problem surfaces.

There are situations where the standard title insurance policies may not be enough, and that's where specialized title policies come in. These policies are designed to provide additional protection in specific circumstances.

One example of a specialized title policy is the CLTA (California Land Title Association) policy, which is a standard policy that protects against clouds on title that are uncovered through a public records search. This policy is usually issued when the title company failed to detect something on recorded title or in the public records.

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The CLTA policy protects against existing liens, clouds, defects, or other encumbrances related to record title. It's a basic coverage that provides peace of mind for policyholders.

Here are some additional types of specialized title policies that may be available:

These specialized policies can be a good option for buyers who want extra protection or for sellers who want to transfer ownership without any issues.