Prior to the sale or refinancing of real property, a title insurance agent searches the property title for adverse matters affecting the transfer of a clean title. The title insurance agent reviews all liens and potential liens and ensures that other outside interest in the property are satisfied before the transfer.

The Details
Prior to closing or settlement, the title agent searches the public records (kept at the courthouse) to determine ownership, encumbrances and any adverse matters affecting the property title. Recorded instruments such as mortgages, liens, tax liens, judgments, and bankruptcy filings are researched and noted. After the research is complete, the title agent will then issue a commitment to insure the property, subject to certain encumbrances being removed prior to settlement. Any serious matters affecting the title may be excluded from coverage. Buyers and lenders understand that certain encumbrances such as mortgages and taxes will be removed prior to settlement. Other encumbrances such as easements for utilities may remain. The wordings of the issued policy controls what is covered.

Types of policies
There are two basic kinds of title insurance: Owner's and Lender's. With a real estate purchase, you pay one premium that is all-inclusive for both policies.

• Owner's Policy
  This policy is issued when you purchase a property. The premium is based upon the purchase price or the loan amount, whichever is greater. Your full coverage will last as long as you or your heirs have an interest in the property. An owner's policy is not issued when you refinance a loan nor is it transferable. The policy is enforced from the time you purchase the property until the time you sell or transfer the property.
• Lender's Policy
  This policy protects the lender's investment in your property. However, this policy insures the lender against title defects that may affect the security of the mortgage loan, not your investment. The lender's policy is only in the amount of the mortgage and decreases as the mortgage is paid off. Therefore, this policy is only valid for the life of the loan. Even if the mortgage lender has a title policy, you still need an owner's policy to protect your interest.