Title insurance, unlike other forms of insurance, such as automobile or life insurance, involves a one-time premium, paid when the real estate transaction is closed. When title insurance is purchased, no monthly, quarterly or yearly payments are due as would be with car and life insurance. Unlike medical and casualty insurance premiums, which are paid to insure against an unpredictable future event, title insurance guarantees that all events in the past have been cleared. This is an important distinction. Since a title company has searched and evaluated the condition of the title the property, title insurance guarantees that the title company has not missed any items which may affect the property.

The goal of title companies is to conduct such a thorough search and evaluation of public records that no claims will ever arise. Of course, as humans, no title insurance company is ever 100% right! Title insurance means that the buyer can make a claim in the event that the conditions of the title is not as the title insurance company says it is. In fact, title insurance companies set aside a percentage of their profits to pay for any claims that arise. In actuality, however, the number of claims is relatively small. When escrow closes, the title company will issue a policy of insurance. This should be kept with other home records, as a copy of it will come in handy in the unlikely event that a problem does arise. Title companies keep records that go back decades, so they will always be ready to back up our policy.

Types of Policies

There are basically two types of title insurance policies -- for property owners and for lenders. Policies for both owners and lenders are written according to guidelines set down by either the California Land Title Association (CLTA) or the American Land Title Association (ALTA). All title companies in Northern California can issue both types of policies. The standard in Northern California is a CLTA policy for owners and an ALTA policy for lenders. However, many people do request the additional residential coverage provided by the ALTA RESIDENTIAL policy, which usually requires a physical inspection and covers some items not covered in the CLTA owner’s policy. Here is a summary of the types of policies and what they cover:

CLTA POLICIES

CLTA OWNERS INSURANCE:

This is the most common type of owners’ insurance available for any commercial property, residential real property and vacant land. The CLTA policy insures:

• Ownership of the property
• That there is access if the property abuts upon an open, public, dedicated street
• That there are no forgeries or failed conveyances in the chain of title
• That the insured has a marketable interest in the real property

The CLTA Owners Policy insures all recorded matters affecting title to the property in order of their priority. In other words, it will show the lender of the first mortgage before the lender on the second mortgage because the first lender has priority.

The CLTA policy may also be ordered by lenders, normally on second deeds of trust by individuals and non-banking or savings and loan lenders. When the CLTA policy is ordered for lenders, it insures all types of property, normally on second deeds of trust by individuals and non-banking or savings and loan lenders. The CLTA policy does not cover:

• Matters which a correct survey would show
• Unrecorded matters
• Matters which a physical inspection of the property would disclose
• Rights of parties in possession
• Unpatented water and mineral rights
• Matters known, created or assumed by the insured

ALTA POLICIES

ALTA RESIDENTIAL POLICY

The ALTA Residential Policy is an owner’s policy insuring owners of 1-4 family residential lots or condominium units. In addition to the basic coverage provided by the CLTA policy, the ALTA residential policy protects the insured against losses caused by:

• Mechanic Liens (labor and material liens) arising out of work done on the property which the insured did not agree to or agree to pay for
• Major encroachments – The insured is protected against forced removal of an existing structure (other than a boundary wall or fence) because it extends onto adjoining land or onto an easement
• Unrecorded interest arising from off record leases, contracts or option
• Zoning Compliance (as long as property in question and zoning are both residential) CC&Rs compliance

Most title companies will insure a seller carryback deed of trust under an ALTA residential policy by endorsement (an addendum to a title policy with a small additional cost). This is the only type of deed of trust that may be insured under this policy.

ALTA LENDERS POLICY

The ALTA Lenders Policy is for institutional lenders only (such as banks and savings and loans). It insures lender priority and the fact that it is marketable. It covers both recorded matters as well as unrecorded matters such as:

• Encroachments
• Unrecorded easements
• Access
• Loss of priority
• Unrecorded liens and encumbrances.

The coverage on this policy is quite broad. A survey or inspection is often required before a policy is issued This policy can be issued on all types of real property.

ALTA OWNERS POLICY

Not to be confused with an ALTA residential owners policy. This is the broadest form of insurance given in California. This policy requires an ALTA survey to be provided to the title company. In addition to the coverage given by a CLTA policy, it insures:

• Encroachments
• Access
• Rights of parties in possession
• Unrecorded liens and encumbrances
• Taxes
• Matters which correct survey would show

An ALTA OWNER'S POLICY DOES NOT COVER MATTERS KNOWN CREATED OR ASSUMED BY OUR INSURED.

When this policy is requested, we may require:

• An ALTA survey (usually at a cost of between $3,000 and $7,000)
• A field inspection by our chief title officer
• A check with all utilities to make sure they have no unrecorded easements
• Copies of all leases and or tenant lists.