Title insurance is a contract of indemnity which guarantees that the title to the property is as reported. If it’s not as reported, you are reimbursed for actual loss or damage under the conditions specified in the policy. The title policy covers you for your loss up to the amount of the policy.
Title companies work to eliminate risks by performing a search of the public records. The search consists of public records, laws, and court decisions pertaining to the property to determine the current recorded ownership, and any recorded liens or encumbrances or any other matters of record which could affect the title to the property. When a title search is complete, the title company issues a Preliminary Title Report.
The Preliminary Title Report contains vital information which can affect the close of escrow: ownership of the subject property, how the current owners hold title, matters of record that specifically affect the subject property, a legal description of the property, and an informational plat map.
What Does a Title Policy Cover?
Not all risks can be determined by a title search since certain things such as forgeries, the identity of persons, incompetency, failure to comply with the law, or incapacity cannot be uncovered by an examination of the public records. The Preliminary Title Report is an offer to insure under certain situations; the title policy is a contract that gives coverage against such problems.
The California Land Title Association (CLTA) is the standard policy of title insurance in California.
What Does CLTA Cover?
- A forged signature on the deed
- Mistakes in the interpretation of wills or other legal documents
- Deeds delivered without the consent of the grantor
- Deeds and mortgages signed by persons not of sound mind, by minors, or by someone listed as single but who is, in fact, married
- Impersonation of the real owner
- Errors in copying or indexing
- Falsification of records
- Undisclosed or missing heirs
- Recording mistakes
The Lender’s Policy Covers
- The priority of the insured mortgage
- The invalidity or unenforceability of the insured assignment
- The invalidity or unenforceability of the lien of the insured mortgage on the title