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Title Insurance Explained

Most people have no idea what title insurance is and what it does, they only know when they are selling buying or refinancing a home it's always required and it adds to their closing costs. If you are one of the many who have no clue about title insurance never fear, CompareTitleCompanies.com is here to help you. One of the main reason most people do not know much about title insurance and what it does, is because the business of title insurance has been generally marketed in a non-transparent and questionable manner to your real estate broker and/or mortgage lender; and which marketing practice may not be in the consumer's best interests.

WHY DO YOU NEED TITLE INSURANCE?

When selling or purchasing a home or other type of property, title insurance is generally required and addressed in the "Contract To Buy And Sell Real Estate" form. When borrowing money from a bank or mortgage lender, they will want to make sure that the collateral (i.e., your home or property) for their loan is protected. Title insurance is an effective and inexpensive way of protecting your ownership, equity and the collateral of your home/ property.

Besides issuing title insurance policies, title companies also provide another necessary and important service to the real estate transaction, commonly known as "Closing Settlement Services". This service is the final step of many, which also includes the gathering of pertinent information, preparation of required legal forms, collection and disbursement of all monies and the obtaining of the signatures for all necessary legal documents to the real estate transaction. Title companies are basically the overseers of the real estate transaction for the benefit of all affected parties.

WHAT IS TITLE INSURANCE?

When a house, building or other property is purchase, sold or used to obtain a mortgage, all the parties involved want to be sure the "title" and transfer of ownership is clear. Title insurance protects against losses arising from problems affecting title to the property. For example, there may be unpaid real estate taxes or other liens, someone may have forged a signature on a recorded document or written a property description improperly. More simply put, title insurance is an agreement that should a problem arise in the ownership records of your property, your title insurance company will fix the problem, defend you against it, or compensate you for any losses.

THERE ARE TWO BASIC FORMS OF TITLE INSURANCE

An Owner's Policy is issued in the amount of your purchase price and protects you as the owner, should a problem arise with the title that was not discovered during the title search and examination. This policy also provides you and your heirs coverage even after you have sold the property. The policy also pays for any legal fees in defending a claim against your title.

A Loan Policy is issued when a bank or mortgage lender is making a loan, whether for a purchase or refinancing your home. The Loan Policy is based on the dollar amount of your loan and protects your lender's interests in the property should a problem arise.

DO THE COVERAGES OF A TITLE INSURANCE POLICY VARY AMONG TITLE COMPANIES?

No. All title insurance companies and their authorized agents issue the American Land Title Association® (ALTA) promulgated policy forms, which contain the same basic coverages and protections.

WHAT IS THE AMERICAN LAND TITLE ASSOCIATION® (ALTA)?

In the United States, the American Land Title Association® (ALTA) is a national trade association of title insurance companies. ALTA has created standard forms of title insurance policy "jackets" (standard terms and conditions) for Owner's and Lender's policies. ALTA forms are used in most, but not all, U.S. states. ALTA also offers special endorsement forms for the various policies; endorsements amend and typically broaden the coverage given under a basic title insurance policy. ALTA does not issue title insurance; they provide the policy forms that title insurance companies issue.

Some states, including Texas and New York, may mandate the use of forms of title insurance policy jackets and endorsements approved by the state insurance commissioner for properties located in those jurisdictions, but these forms are usually similar or identical to ALTA forms.

The American Land Title Association® (ALTA) is a national trade association of title insurers. ALTA has created standard forms of title insurance policy "jackets" (standard terms and conditions) for Owner's and Loan Policies. ALTA forms are used in most, but not all, U.S. states. ALTA also offers special endorsement forms for the various policies; endorsements amend and typically broaden the coverage given under a basic title insurance policy. ALTA does not issue title insurance; they provide the policy forms that title insurers and their authorized agents issue.

WHO CAN PROVIDE A TITLE INSURANCE POLICY?

Either a licensed title insurance company or their authorized and licensed title agent can issue a title insurance policy. The name "Title Company" is a generic and commonly used term in the real estate marketplace to identify a title insurance company or their authorized title agent. However, there is a substantial difference between the two entities according to Colorado law.

Title Insurance Company:

legally defined by C.R.S. - 10-11-102(10)
A title insurance company is basically an insurance company that protects the interests in one's property, whether as an owner or lender. A title insurance company is also referred to in the real estate market place as a "title insurance underwriter" when associated with an authorized title agent.

vs.

Title Agent:

legally defined by C.R.S. - 10-11-102(9)
A title agent is basically a person or company that is authorized by a title insurance company to solicit and issue title insurance policies on their behalf. It's important to note that a title agent may be authorized to issue title insurance policies on behalf of multiple title insurance companies/ underwriters.


Both a Title Insurance Company and Title Agent are licensed and regulated by the Colorado Division of Insurance through Title Insurance Regulations 3-5-1, 8-1-1, 8-1-2, & 8-1-3.

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