Title insurance is protection for the lender--and the buyer--against defects in the title (deed) of a property. Just because you purchase a home, got to settlement and move in does not mean that what you have purchased, title-wise, is what you thought you were purchasing. Title problems can arise that could affect the future value and marketability of the property. Some examples of problems that can arise with titles include:

• An unknown or undisclosed heir with clams against the property.

• A forged deed.

• Public record errors.

• Undisclosed liens.

• Undisclosed encumbrances.

• Fraudulent acts.

• Easements.

Title insurance is a one-time premium, paid at closing. There are many variances, though, in costs, who is responsible for paying for the policy (seller or buyer) and policy inclusions and exclusions. These will vary depending on what is customary in your local area.

Title insurance, in effect, guarantees (subject to the limits of the policy) that the title is good and marketable. If there are problems with the title in the future, the title insurance company is responsible for any shortcomings--not the owner or the lender. There are 2 levels of coverage generally available.

• Lender's Coverage: Virtually all lenders will require title insurance for at least the amount of the mortgage. This coverage amount will decrease as the mortgage balance decreases during the term of the loan.

• Owner's Coverage: A title insurance policy with owner's coverage goes one step further. It is usually issued in the amount of the actual purchase price of the property, and maintains a constant coverage for that amount throughout the ownership period.