In working with a new landowner, they were asked if they wanted owner’s title insurance or a title opinion on the property they were purchasing. They asked me what both of these entailed – hence this article on the pros/cons of each.
Neither an owner’s title insurance policy nor an attorney’s title opinion is an absolute guarantee as to the status of title; there is always a possibility the owner will lose title based on a title defect.
Title Opinion: generally completed by an attorney and discloses only defects which are apparent from the public record. The title opinion is a statement of the attorney’s professional judgment expressed, following a thorough title search, regarding the owner’s rights to the property. If the attorney is wrong about the owner’s rights to the property, the owner’s remedy is a claim for negligence against the attorney. A title opinion is completed after research of public records – often after the update of an abstract and is generally less expensive than title insurance.
Owner’s Title Insurance: generally provides greater title protection against certain title defects than a title opinion. This insurance provides payment and damages with the insured’s loss of possession of the property that results from a defect in title. Title insurance policies reveal defects available from research of public record, but also insure against other risks which are not discoverable after a thorough search of public record. Given this additional level of protection, owner’s title insurance is generally more expensive than an abstract update and attorney’s title opinion.
Protection can include some of the following defects:
- Fraud in the execution of documents
- False impersonation by someone purporting to be the owner of the property
- Errors in surveys
- Undisclosed or missing heirs
- Wills not properly probated
- Transfer of title by a minor
- Incorrect legal descriptions
- Non-delivery of deeds
- Clerical errors in recording legal documents
- Property rights resulting from a marriage or divorce not disclosed by public record
- Abstracting errors
- Delivery of deeds after the death of the grantor… and other defects
Title insurance is retrospective in nature as it protects against defects that occurred in the past, but are discovered in the future. The premium is paid only once, but coverage extends for as long as the insured has an insurable possessory interest in the property or is liable to a subsequent owner for failure to convey marketable title.
Owners of real estate, then, should consider the pros and cons of a title opinion vs. owner’s title insurance.