TITLE INSURANCE PRIMER

A title is the right to ownership and possession of home or property. It is possible that someone other than the owner has a legal right to the property. If that right can be established, this person can claim the property outright or make demands on the owner as to its use.

Any number of problems that remain undisclosed after even the most careful search of public records can make a title defective. You may not learn of these hidden defects for many months or years.

Title insurance is the application of the general principles of insurance to real estate titles. But, unlike other types of insurance which protect the insured against loss due to unexpected future events, title insurance protects against loss which may occur due to events that took place in the past. Specifically, title insurance protects the buyer against loss resulting from previously unreported land title defects insured against, such as forgeries, claims by missing heirs, recording errors, etc.

In Texas, the two most common types of title policies are "loan policies," which protect lenders, and "owner policies," which protect property buyers. Most lending institutions will not loan you money to buy a house or other property unless you purchase a mortgagee policy. This policy will repay the balance of your mortgage if a claim against your property voids your title.

That if you, as insured, suffer a loss as a result of title defects, the insurer will indemnify or reimburse the insured for loss up to the face amount of the policy and any related legal expenses.

• Maintains a database of legal title composed of public records
• Helps solve certain title defects prior to closing
• Issues a title commitment - intent to issue a policy
• Acts as an independent central clearing house collecting necessary documents, following lender's instructions, making arrangements for proper payments and distribution of funds
• Prepares Closing Statement (HUD 1)
• Coordinates and handles closing transaction
• Records documents with county
• Issues title policy

The one time premium, paid at the time of purchase of the home, is directly related to the cost of the home or piece of real estate. It provides coverage for as long as you own the property.

Title Insurance regulation varies greatly from state to state. In Texas, it is fully regulated by the Texas Department of Insurance under the authority of the Commissioner of Insurance. Premiums paid are for title search, examination, closing the transaction and policy issuance. All of the rates, rules and forms for the writing of title insurance in Texas can be found in the Basic Manual.

There is a single premium and the coverage lasts as long as the insured has an insurable interest in the property described in the policy.

The Commissioner of Insurance has the duty under the law to fix and promulgate the premium rates. The rates must be reasonable to the public and nonconfiscatory to the industry. In order to collect data on which to determine the property rates, the Commissioner may require companies to submit information such as loss experience, operation expense and other information. Before the commissioner fixes a premium rate, and before insurers may charge such a rate, the commissioner must provide reasonable notice and a hearing to title insurance companies, agents and the public. Hearings are scheduled biennially in even-numbered calendar years.

The Texas Title Insurance Basic Manual is a publication containing the latest Texas statutory changes as well as rules, rates and forms promulgated by the Commissioner. http://www.tdi.state.tx.us/company/titleman.htmI

The purpose of this title is to completely regulate the business of title insurance, including the direct issuance of policies and the reinsurance of any assumed risk, to protect consumers and purchasers of title insurance policies; and provide adequate and reasonable rates of return for title insurance companies and title insurance agents.