The function of title insurance is as follows: to ensure your rights and interests to the property are clear; and that transfer of title takes place efficiently and correctly, and that your interests as a homebuyer/homeowner are fully protected.
Title companies issue two types of title policies:
Owner’s Policy, which covers the homebuyer/homeowner. This policy is only applicable on a purchase transaction and is generally a cost paid by the seller.
Lender’s Policy, which covers the lending institution over the life of the loan. If the loan is for a home purchase, both types of policies are issued at the time of closing for a one-time premium. The lender’s policy is a cost paid by the borrower. If the loan is a refinance, you already have an owner’s policy that was issued when you purchased the property, so only a lender’s policy will be issued.
After a thorough examination of the records, any title problems are usually found and can be cleared up prior to your purchase of the property. If any claim covered under your policy is ever filed against your property once a title policy is issued, the title company will pay the legal fees involved in the defense of your rights. They are also responsible to cover losses that may arise from a valid claim. This protection remains in effect as long as you or your heirs own the property.