It is the application of the principles of insurance to risks/hazards that exist in every real estate transaction.
Title insurance protects the insured from future losses arising out of events that happened in the past.
Yes. There are three types of title policies. The first one is the owner's policy, which the buyer would need for his or her protection. The second one is the lender's policy (mortgagee's policy), which only protects the lender. A majority of the lending institutions require a lender's policy for each real estate loan. Additional coverage is available through an “Eagle” policy.
There are no annual premiums. The premium is calculated based on the sales price or the mortgage amount, and it is a one-time charge for the life of the policy.
There are four steps necessary to get to the point of issuing a title policy (whether owner's, lender's or leasehold). The four steps are as follows:
Each of the first three above-referenced steps has a fee associated with it, and the party who pays for each of these is determined by the real estate contract.