Title insurance provides coverage for losses that occur when a land title is not free and clear of defects (e.g. claims and defects that were unknown when the title insurance was written). Two types of title insurance policies are common, a lender's policy and an owner's policy.
Lender's Policy When you take out a mortgage, the lender seeks protection for their investment by requiring lender's title insurance against losses resulting from claims made by others against your new home. This policy does not protect you nor does the seller's title insurance policy protect you.
Owner's Policy Since a lender's policy does not protect your financial interests, an owner's title insurance policy is worth serious consideration. If someone has a claim against your new home and you are not insured, the result could be financial disaster. Many insurers offer discounts when both the lender and owner policies are purchased at the same time.
Residential Owner's Policies used in this survey:
The CLTA policy is usually referred to as the "standard form policy" and is generally intended to insure the owner of residential real estate. This policy has the most basic coverage compared to the other two policies used in this survey insofar as the policy generally insures matters that are disclosed in public records, and excludes most matters not disclosed in the public records. However, some off-the-public-record matters that the CLTA form does insure include forgery, lack of capacity, or non-delivery of the deed.
ALTA-Residential - This policy has more coverages than the basic CLTA policy and insures some matters not disclosed in public records, such as survey boundaries, and property access rights. The ALTA policy is a nationally standardized form used by lenders on a countrywide basis and is favored by institutional lenders which re-sell loans in the secondary markets.
ALTA Homeowner's Policy of Title Insurance - This policy has the broadest coverages compared to the CLTA and ALTA-Residential, insuring many matters not disclosed in the public records, such as easements, lack of access, encroachments, violations of codes, violations of deed covenants, conditions or restrictions, or lack of marketable title. The ALTA Homeowner's Policy of Title Insurance is the default title policy for the California Real Estate Sale and Purchase Agreement - Contract Form.
By the Department of Insurance - California... more