What is a title search vs. title insurance?
There is a big difference between a title search and a policy of title insurance. Both products should (hopefully) disclose an accurate picture of the state of title. However, should there be an error or omission in the search, only one of these products provides immediate recourse and assistance under a title guarantee. Under a title insurance policy’s “duty to defend”, if an insured’s title is challenged the title insurer has a duty to pay for legal expenses involved in defending the insured’s title. Purchasing a title search, on the other hand, is really just the purchasing of the services of a title examiner to go out to the courthouse and report back with information. The information retrieved is usually much of the same information that a title insurance agent would use in the course of conducting its due diligence in preparation for issuing a title insurance policy. The biggest difference in this regard then is that by purchasing title insurance, you have not only ascertained the state of your title, but you also have an insurance policy that guarantees that status to you. This insurance policy carries with it not just a contractual assurance of title but it also provides immediate recourse to the claims department resources of a title insurance company. If you are a homeowner who has purchased title insurance and you discover that a lien is encumbering your property that was not disclosed, and by extension, not excepted from the coverage of your title insurance policy, you can simply notify your title insurer of the title claim and the insurer will handle it from there. If the matter does indeed amount to a title claim, the title insurer will assign an approved, vetted attorney with the relevant experience to defend your title. It is for these reasons that when you buy a home, institutional lenders require title insurance to guaranty the priority of their mortgage in the chain of title. To investors who may purchase the mortgage after you close on your home, it is very important that those mortgages be properly secured and for the lender to have recourse to an identifiable company that is regulated and that has been required to pay a portion of its revenue into a claims reserve. These protections are not part of a simple title search.