What is Title Insurance and why do you need it?

Posted on 06/13/2011 by Jim Suchey No Comments

A policy of title insurance is used in most real estate transaction in Colorado where a mortgage is attached. Unlike casualty insurance which protects against future acts, the title insurance protects against loss or damages resulting from defect that may have occurred in the PAST.
The process begins with the title insurance company providing a search and examination of the public records to determine and disclose the current facts relating to owners of a piece of real estate:
A. Who owns the property
B. Any liens or encumbrances against the property or its owner
C. Easement and or restrictions
D. Other recorded interests
With this information the buyers, seller, real estate agent, lender and settlement agent can work toward closing the transaction. When the proper documents to transfer title have been recorded, a title insurance policy is issued to the new owner and their lender.
The charge is typically a one-time premium, paid for at the time a policy is to issued (at close). The fee includes the cost of the title search, examination, production and risk.
Although there are alternatives, title insurance is the most widely used method to protect the ineterst of the new owner or lender. In Colorado, the seller will typically pay for the owners title insurance policy.
In Colorado, due to the new federal laws, the owners policy is disclosed as a cost to the buyer and then credited back to the buyer at close.

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