Title insurance is one of the great mysteries when buying or selling real property.
In California, rarely does someone purchase residential real property without title insurance included. Almost as rarely does the Buyer know why title insurance is being purchased and what coverage the insurance provides.
Basic title insurance questions include: do I need title insurance; who pays the premium; and what does the insurance do for me?
The answer to the first two questions are simple . . . yes, Buyers in California need title insurance to be certain that they are buying property with marketable title and, generally, the Seller pays the premium for the Buyer’s title policy through escrow, based upon the selling price, and the Buyer pays the premium for Buyer’s lender’s title policy based upon the amount borrowed by the Buyer to purchase the property.
The simple answer to what does it do for you, is that Title insurance protects against losses due to defects in title.
But that answer is misleading because in California there are three different insurance coverage levels, depending on the type of residential title insurance policy that is purchased.
Based upon this chart, provided by Fidelity National Title chart, the best title insurance choice for a Buyer is the ALTA Homeowner’s Policy, as it provides the broadest coverage.
| Coverage Item |
CLTA Standard Coverage |
ALTA Residential (Plain Language) |
ALTA Homeowner’s Policy |
| Post Policy Forgery Protection |
No |
No |
Yes |
| Enhanced Access Coverage |
No |
No |
Yes |
| Building Permit Violations |
No |
No |
Yes |
| Subdivision Map Act Coverage |
No |
No |
Yes |
| Restrictive Covenant Violations |
No |
No |
Yes |
| Mineral Extraction Coverage |
No |
No |
Yes |
| Map Inconsistencies Coverage |
No |
No |
Yes |
| Coverage Extended to Living Trusts |
No |
No |
Yes |
| Enhanced Encroachment Coverage |
No |
No |
Yes |
| Automatic Inflation Protection (5 years) |
No |
No |
Yes |
Helpful online article on Title Insurance
I recently came across this article which includes an example of why every Buyer should insist on and obtain an ALTA Homeowner’s Title insurance policy when purchasing residential real property.
Click here to read this article.
Author(s)
K.C. Thompson