Title insurance is used to ensure the credibility of the "record" title to a property as it is recorded in the local registry of deeds. While a careful review of a property's deed is usually performed by a certifying attorney before closing, defects can and do still go undetected. Title insurance is used to protect both lenders and property owners from losses due to these defects.Protecting the interests of lenders and property owners is done in two parts. Loan Policies protect the lender's interest in a property, while an Owner's Policy is designed to protect the property owner.

The lender will always require a loan policy to protect its mortgage interest in the property, but often property owners go unprotected.

Why you should say "Yes" when asked if you want an Owner's Title Insurance Policy at your closing.

1. An Owner's Policy is your best protection against possible title defects that could result in claims against your property. For a one-time premium, an Owner's Policy is your best protection against potential title defects that could deprive you of your ownership rights. In the event of a claim, the title insurance company will either correct covered title problems or will reimburse you for insured losses up to the amount of the policy and will defend against any lawsuit attacking your title as insured.

2. The Loan Policy issued to your lender does not protect you. The lender requires a Loan Policy to protect its mortgage interest in your property. While the premium for this policy is included in your closing costs, it does not protect you, and you cannot make a claim if you suffer a loss.

3. An Owner's Policy insures against title defects that are not covered by an attorney's certification of title. An attorney's certification of title is an opinion of the quality of the "record" title based on a review of the public records at the registries of deed and probate. However, the certifying attorney may not be responsible for numerous title defects that would not be found despite the most thorough search of public records, such as:

a. Forged documents
b. Unknown creditors
c. Undisclosed or missing heirs
d. Missing signatures
e. Mistakes in recording
f. Incapacity of a grantor

All of these hidden defects and many more are covered by the Owner's Policy. The attorney's certification covers those matters that could reasonably be discovered during the time frame of the title search. An Owner's Policy provides the added protection of covering title defects that existed anytime prior to the issue date of your policy.

4. The Owner's Policy can help you when you want to sell your property. Potential buyers or lenders may refuse to purchase or refinance your property if they believe the title is unmarketable. The Owner's Policy insures against loss of damage that you may suffer as a consequence of the marketability issue, and the title insurance company may enable the sale or financing to go through by offering to insure the buyer or lender against any title defects that may exist.

5. The Owner's Policy provides you with immediate and expert legal support. Most claims arise through the rejection of title by the buyer's attorney. When this happens, it is imperative that the extent of the defect is known immediately, that a plan of action is initiated to remove the defect, and that the work to clear the title is performed diligently and competently. Using in-house experience and knowledge, the title insurance company is able to zero in on the problem and assign attorneys who are experienced in correcting title defects. If the claim is covered by the Owner's Policy, all work to remove the defect will be paid for by the title insurance company, including representation of the insured in a lawsuit to establish the title or remove an encumbrance. An Owner's Policy may save you thousands of dollars in legal costs.

6. To protect what may be the most important investment you will ever make. For a one-time premium, an Owner's Policy remains in effect for as long as your heirs own the property. Owner's coverage gives you the ultimate in peace of mind by protecting the title to your home.

Losing a home is a cruel thing, but life can be cruel -- even to those destined for greatness.
Abraham Lincoln was born in a meager, one-room cabin on the Big South Fork of Nolin's Creek near Hodgenville, Kentucky. It had a dirt floor, one window and a stick-clay chimney. Lincoln's father, Tom, had paid $200 for the cabin and 300 acres of discouraging land. It wasn't much, but it was home and the young family's only chance for a decent life.

After four years of fighting mosquitoes, heat and hardscrabble land, the Lincolns had to pack up and leave. There was a defect in the title. They didn't have the right sort of papers and somebody else had a better claim to the land. With three-year-old Abe in his mother's arms, the family moved eight miles away to Knob Creek.

In less than four years, Tom Lincoln had to go to court to prove his ownership rights to this second farm. Another claimant to the land sued him as a "trespasser." Tom Lincoln won the suit, but was haunted by the fear that he might someday lose another property. There was enough talk of land-titles, landowners, landlords, land-laws, land-lawyers and land-sharks to make him unsure of his title. After all, Daniel Boone, the first pioneer of the Kentucky wilderness, had lost every inch of his once vast landholdings because he had "the wrong kind of papers." Tom decided to move his family to Indiana where there was rich, black land -- government land with clear title and the right kind of papers. Thus, Abraham Lincoln lost a second home to title problems.

It was the anxiety and outright losses of the Lincolns and other hard-working Americans that gave rise to today's title insurance industry. The first land title insurance company was founded in Philadelphia in 1876. Just a few years later, in 1889, the firm that was to become First American Title Insurance Company was established to protect buyers against the hidden hazards of real estate ownership: forgeries; faulty surveys; hidden liens; conveyances by a minor or mentally incompetent person as being single; and many other title defects. Even the most complete search of records may not reveal them all.

Today, title insurance is just as important as ever. The same potential flaws in the title exist. A home is still the largest purchase most of us make in our lifetime. And, with escalating land values, the loss of property can still bring a family to ruin. Consequently, both buyer and seller should insist on the stability and reliability they receive through coverage by title insurance.

The unfortunate loss of the Lincoln family would have been covered by insurance had Thomas Lincoln owned a title policy.