Unexpected Real Estate Title Defects: How to File a Claim With the Insurance Company

Image of a dirt path through the woods leading to a greenhouse.

Much is said on the role of title insurance in protecting protect the buyer from unknown liens, easement holders, or a prior owners’ heirs who claim an interest in the buyer’s new home. 

Title insurance covers the policy holder against loss related to these various defects in title. Other examples of title defects include undisclosed restrictive covenants on the property, documents recorded with mistakes, and fraudulent or otherwise invalid transactions in the chain of title. A good title insurance policy protects the policy holder against property devaluation stemming from such problems if they arose during a previous ownership, unbeknownst to the buyer. The role of the title insurer is to defend the policy holder against legal challenges to the title, and to pay the policy holder for covered losses in value.

So far, so good.

But what happens if there is a title defect, and the owner actually has to use the title insurance? 

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Real Estate Title Insurance: A Brief Explanation

Image of a house with a blue sky background. Captioned: Real Estate Title Insurance, A Brief Explanation.

Title insurance emerged more than a century ago. It had a purpose: to stop swindlers from cheating buyers, by ascertaining that land was, in fact, owned by the person selling it.

Since then, it has grown into a multi-billion-dollar business. 

And while today’s title insurance industry ostensibly protects homeowners from defects in their deeds, some believe it has been rendered practically obsolete in the digital age. Today, a record search can be done for less than a tenth of the prevailing rate of title insurance—which can exceed $2000, depending on the home’s price and the state in which the property sale occurs. 

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Quit Claim Deeds and Continuation of Title Insurance

Provided by Matthew A. Quick, Esq., an attorney licensed in the state of Illinois.

Title insurance coverage is dictated by the terms of the policy issued by the title insurance company. In most, if not all, policies for title insurance there is a provision for “Continuation of Coverage” or “Continuation of Insurance.” Typically, this provision provides that the insurance will continue only so long as the insured holds an interest in the land or has liability by reason of warranties given in any transfer of the title.

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