Although there are several different types of title policies, there are two main ones that are issued most of the time.

Owner’s Title Policy

The owner’s policy insures the owner that the title to the real property is vested in that owner and that it is free and clear from all defects, liens and encumbrances except those that are listed as exceptions in the policy or shown as policy exclusions. It also covers damages or losses obtained as a result of the title being unmarketable. The policy also includes coverage for loss or damage resulting from no access to the land. These are just the basic coverages, there are expanded forms of residential owner’s policies that cover additional risks.

The amount of insurance provided on an owner’s policy is usually the purchase price paid for the subject real estate. Just like other forms of insurance, coverages can also be added or deleted with separate endorsements. There are many forms of standard endorsements to cover a variety of common issues. The premium for the policy is usually paid by local custom for a particular state or county which is usually reflected in the sales contract. You should ask about the approximate cost of a title insurance policy before signing a real estate contract if you are going to be the one paying for it. A real estate attorney, agent, or mortgage lender can provide an approximate cost. You can also use the title premium calculator located on this site.

Loan Policy

This is often called a Lenders’ Title Policy and it is issued only to mortgage lenders. Broadly speaking, it tracks the assignment of the mortgage loan, insuring that the policy benefits the purchaser of the mortgage loan should it be purchased by a third party. For this reason, these loan policies are very helpful assisting in the sale of mortgages in the secondary market. The secondary market is made up of high volume purchasers like Fannie Mae and the Freddie Mac as well as private lending institutions.

The American Land Title Association (“ALTA”) title policy and endorsement forms are almost without exception used throughout the country although in some states, certain modifications have been made. Generally speaking, the basic elements of coverage provided to the lender insure against losses occurring from the following matters:

1. Title to the insured property on which the insured mortgage is secured by is either
   • Not owned by the mortgagor,
   • Is Subject to undisclosed defects, liens or encumbrances, or
   • Unmarketable.
2. There is no legal right of access to the land.
3. The lien created by the mortgage:
   • is invalid or unenforceable,
   • is not prior to any other lien existing on the property on the date the policy is written, or
   • is subject to mechanic’s liens under certain circumstances.

As with all of the ALTA forms, the policy also covers the cost of defending insured matters against attack.

The first and second elements are important to the lender because they cover its required condition of title in order to foreclose. The third element relates to items that could interfere with the foreclosure process.

All policies contain certain exclusions and exceptions to coverage that are set forth in the insuring provisions.

Also, there are loan policies that cover single family or one-to-four family residential loans.

Statewide Title Services, Inc.

The Law Property Assurance and Trust Society was formed as the first title insurance company in the United States.

The whole reason that title insurance began goes back to 1868, in Philadelphia, whereby a transaction was closed that demonstrated the need of more protection in real estate conveyancing than merely the examination of the public records. This single transaction can be credited with the birth of the title insdustry.

The facts of the case are set forth in the Pennsylvania Supreme Court case styled, Watson vs. Muirhead, 57 Pa 161.

In this particular case, a conveyancer performed a title search that revealed the existence of a judgment. The judgment was duly noted and the abstract was delivered to an attorney for him to opine as to the effect of the judgment on the title to the property. The attorney opined that the judgment in question was not a valid lien encumbering the property and the purchaser completed the transaction based upon the opinion.

Shortly afterward the deal was closed, execution was made upon the judgment and the property was subsequently sold at a Sheriff’s Sale. Litigation ensued and the courts decreed that the judgment was in fact a valid lien and the Sheriff’s Sale stood.

The attorney and the conveyancer were found to be liable and as a result of the financial loss incurred in this transaction, group of investors interested in real estate law decided that something should be done to protect innocent investors from such similar situations. Thus, the first title company was born.

This new type of insurance would be called “title insurance” and addressed many of the issues contained in the Watson vs. Muirhead case such as :

• Liability without prooving negligence
• Protection as a result of a reduction of the risk of insolvency
• Assumption of risks above  those disclosed in the public records

Ever since then, the title insurance industry has grown to where it is today. It acts as a vital  component in the  overwhelming majority of real estate transactions in the United States.

Statewide Title Services, Inc.