Title Insurance is a unique type of insurance. Generally, a person thinks of insurance in terms of a payment for future loss due to the occurrence of some future event. It is paid for by a monthly or annual premium. Title Insurance is an insurance policy that protects you or your lender for defects in the chain of title, as found in the public records. A title policy insures against events that occurred in the past and there is only a one-time premium, typically paid at the closing.
Title Insurance gives you the assurance that the property you are purchasing is free and clear of any defects in the chain of title found in the public records. Put simply, the policy protects you in case someone tries to lay claim to your property and/or pursue you for it. If you have Title Insurance, your insurer will fix the problem, defend you against it, or compensate you for any losses that arise from it.
Title Insurance covers problems arising from unpaid taxes, fraudulent or forged documents, incorrectly recorded documents, spurious or improper liens, previously undisclosed claims from an heir of a previous owner, and even undisclosed easements or past violations of covenants by previous owners.
In order to determine what is on title, Homestead Title does an exhaustive search of the public records for the documents associated with the property. We then determine if there are any rights or claims that may have an impact on title such as previous mortgages, unpaid taxes, recording defects, judgments, encumbrances etc. Once reported, Homestead Title resolves any issues prior to closing to give you piece of mind your property is free and clear, aside from any new financing you may be obtaining. You are also covered for any unreported claims discovered after closing.
Typically there are 2 types of title policies; The Owners Policy and The Lenders Policy. The Owners Policy in Colorado is typically paid for by the seller but can be negotiated in the contract. The Owners Policy insures the owner from any defects from previous owners. If the buyer is obtaining a loan the lender will most likely require a lenders policy. This protects the lenders interest in the property and is paid for by the buyer/borrower.