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Business & Real Estate

What's in a title? Some factors to know about title insurance

Title insurance is not typically at the top of the list in terms of a home buyer's priorities.

In fact, many home buyers, especially first-time buyers, may not even know what title insurance is or the critical protection it provides to consumers.

Here are some key facts about title insurance, and why it is so important to home buyers:

Title companies protect consumers by identifying and working to eliminate potential risks and competing claims on a property transaction before the sale is final.

Most other forms of insurance-medical and casualty insurance, for example-collect premiums based upon anticipated future claims.

Consumers also benefit from title insurers' independence and expertise. Because they face no pressure to "close the deal at any cost," title insurers can facilitate property transactions by serving as an honest broker between buyers, sellers and lenders.

Before issuing a policy, a title company performs an extensive search of public records to determine if any competing interests have claims against the property. Failure to identify or insure against potential claims could lead to serious legal problems, financial loss and major headaches for the homeowner.

Claims can include:

* liens against the property

* legal actions

* rights of way

* easements

* other disputed interests.

Once issued, a title policy protects a homeowner against claims made on his or her property.

The policy covers legal fees and any loss resulting from a valid claim.

Title insurance coverage requires a single payment made at the time of purchase, rather than the periodic renewal premiums associated with most other forms of insurance.

The cost of title insurance is usually less than 1 percent of the purchase price of a home.

Title insurance protection remains in effect as long as the homeowner, or his or her heirs, owns the property.

Consumers can purchase title insurance protection directly from a title insurer or from an underwritten title company (UTC).

Title insurers and UTCs conduct the time-intensive records searches; however, the UTC open operates as an agent of the title insurer that underwrites the title policy.

Under current law, licensed title insurers must file their rates with the California Department of Insurance, which must approve or deny rate schedules, and are required to publicly post premium schedules.

Provided by the Consumer Alliance for Homeowner Protection.

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