A property has a history
When real estate changes hands, the buyer receives an interest in the property through a deed. Earlier deeds, mortgages, easements, liens, court filings, and other records can affect that interest. Together, these matters form the property’s title history.
A title search reviews records within the scope of the particular search for issues that may need attention before closing. It may reveal, for example, an unreleased mortgage, an unpaid tax lien, or a recorded easement.
What the insurance does
Title insurance addresses certain covered problems with ownership or other interests in land. Unlike insurance aimed mainly at future accidents, title coverage generally responds to covered title problems rooted in events that occurred before the policy date. A claim may surface only after the purchase.
If a covered claim arises, the insurer’s obligations are defined by the issued policy. Depending on its terms and the claim, the insurer may defend title, resolve the issue, or pay a covered loss up to applicable limits. A search can identify many issues, but some problems may not appear in the records being searched.
Owner and lender policies serve different people
An owner’s policy protects the insured owner’s interest. A lender’s policy protects the lender’s interest in its mortgage and usually does not protect the buyer’s equity. When financing a purchase, ask which policies are being issued and who each policy names as insured.
Coverage, exclusions, exceptions, amounts, premiums, and duration depend on the policy form and the transaction. Review the commitment and issued policy for the answer to a specific coverage question.
These guides are general education. Processes and documents vary by transaction and state. The terms of any issued policy control coverage. Ask your title or closing team about your documents, and take legal or tax questions to your own attorney or adviser.