Title Insurance protects real property buyers, and lenders, from financial loss which arise from defects in the title to the real property.

The most common type of title insurance is a lender’s title insurance policy.  This is used when a real property buyer is borrowing money to help pay the purchase price of the real property.  The real property buyer, who is also the borrower, purchases the lender’s policy to protect the mortgage lender.

Another common type of title insurance is owner’s title insurance.  This is used to protect the purchaser of the real property.  It is often paid for by the seller of the real property to protect the buyer’s equity in the real property.

Title insurance protects real estate owners and lenders against property loss or damage they might incur because of liens, encumbrances or defects in the title to the real property.

In Arizona, a title company searches public title records, such as in a County Recorder’s office and in their own title plant, to find several types of ownership issues. These issues may include:

  • Easements
  • Mistakes in recording or indexing legal documents
  • Forgeries or fraud
  • Impersonation of the true owners of the land by fraudulent persons
  • Improper execution of documents
  • Undisclosed or missing heirs
  • Unpaid judgments and liens
  • Unpaid taxes and assessments
  • Unreleased mortgages

In Overholtzer v. Northern Counties Title Ins. Co., 116 Cal. App.2d 113, 253 P.2d 116 (1953), an easement was not disclosed on the title policy. The court measured damages by the diminution in value of the real property due to the undisclosed easement. Other cases from other states applied a “cost of cure” measure of damages.

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