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What is title insurance?

Title insurance is an essential part of any land purchase. It covers unknown defects in the chain of title that existed at the time you purchased the property. A chain of title is the historical line of ownership of the land. Thus, if the prior owner or owner before that did something that would put their ownership of the land into question, title insurance protects you, as the current holder of title from losing your ownership interest, or if it is not a defect that can be cured, reimburses you for your loss. It also covers the legal fees in order to defend title in court.

When a title defect exists, it is also referred to as a "cloud on title," which means that the chain of ownership is unclear or called into question. Perhaps an owner died and the estate was not probated, and there is a missing heir or information about the estate. Perhaps a deed omitted the buyer's marital status, or contained a missing or inaccurate legal description of the land in question. Because land is a unique asset, the legal description in a land purchase is required to clearly distinguish the parcel being sold from other parcels of land.  Perhaps there was an unknown easement to cross or use the land granted by a prior owner, or an important document was not recorded with the county where the property is located. These are all common sources of title disputes.

If you have an owner's title insurance policy, it protects you. If your property is mortgaged, the bank has a policy as a lender which protects their security interest (the home or land) in the event that the mortgage is not enforceable, or has lost priority to other debts (such as a prior judgment or a tax lien) as a result of a cloud on title jeopardizing their right to repossess the home and sell it to pay off the loan it provided to you. 

It is not uncommon to run into difficulties getting your title insurance company to cover and defend title on a property. Thus, you want to contact a lawyer experienced in real estate matters to help you navigate the process.

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